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•'  the  loan 

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Week, 
<»r  a  longer 


INDUSTRIAL  GOODWILL 


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5fee  Qraw-MlBock  &  7n& 

PUBLISHERS     OF     BOOKS     F  O  fO 

Coal  Age     v     Electric  Railway  Journal 

Electrical  \U?rld  v  Engineering  News-Record 

American  Machinist  v  Ingenierfa  Internacional 

Engineering 8 Mining  Journal      ^     Power 

Chemical  6   Metallurgical  Engineering 

Electrical  Merchandising 


H 

4- .. 


INDUSTRIAL 
GOODWILL 


JOHN  R.  COMMONS 

UNIVERSITY   OF  WISCONSIN 


FIRST  EDITION 
SECOND  IMPRESSION 


McGRAW-HILL  BOOK  COMPANY,  INC. 

239  WEST  39TH  STREET.    NEW  YORK 


LONDON:  HILL  PUBLISHING  CO.,  LTD. 

6  &  8  BOUVERIE  ST.,  E.  C. 

1919 


COPYRIGHT,  1919,  BY  THE 
McGBAW-HiLL  BOOK  COMPANY,  INC. 


T»»    MAPX.B    PXBBB 


TORJC    PA 


CONTENTS 

CHAPTBR  PAOB 

I.  Commodity 1 

II.   Machinery 7 

III.  Goodwill 17 

IV.  The  Public 28 

V.  Democracy 37 

VI.  Solidarity 49 

VII.  Theory  and  Practice 62 

VIII.  Security 65 

IX.  Labor   Market 74 

X.  Insurance 83 

XI.   Health 94 

XII.  The  Shop 106 

XIII.  Education 126 

XIV.  Loyalty 143 

XV.   Personality 151 

XVI.   Depression 168 

XVII.  The  World 187 

REFERENCES 198 

INDEX.  .                                                                                           .  201 


INDUSTRIAL  GOODWILL 


COMMODITY 

A  few  years  ago  I  visited  the  employment  office 
in  a  factory  of  several  thousand  workers.  Scattered 
about  were  a  number  of  sturdy  immigrants  fresh 
from  the  old  country.  On  that  day  the  manager  was 
hiring  Swedes.  He  said  that  the  week  before  he  had 
been  hiring  Poles,  and  before  that  he  had  taken  on 
Italians.  It  was  a  good  idea,  he  said,  to  get  them 
mixed  up.  He  told  me  of  other  large  firms  in  that 
city  with  similar  employment  managers  and  a  simi- 
lar policy.  They  had  an  informal  club  that  met 
usually  once  a  week. 

One  of  the  things  of  which  they  were  proud  was 
their  plan  of  forecasting  the  labor  market.  If  labor 
was  getting  restless  they  could  anticipate  it  by  a 
concerted  raising  of  wages  10  per  cent  until  the  storm 
blew  over,  and  then  reduce  the  wages  back  again, 
thus  counteracting  the  work  of  agitators. 

In  order  that  they  might  be  more  accurately 
informed  of  the  prospects  of  the  labor  market  they 
had  confidential  arrangements  with  certain  leaders 
of  trade  unions  in  the  town,  so  that,  if  the  unions 
were  bringing  organizers  into  the  factories  to  stir 

i 


2  INDUSTRIAL  GOODWILL 

up  unrest,  the  leaders  would  let  them  know  in 
advance  and  would  tell  which  establishments  would  be 
organized. 

I  visited  one  of  the  sidewalk  offices  of  one  of  these 
establishments.  A  hundred  men  or  so  were  assem- 
bled at  the  gate.  The  foremen  were  sending  down 
their  requisitions.  The  employment  officer  went 
along  the  line  of  the  unemployed,  looked  at  their 
feet,  sized  up  their  nationality  and  fitness,  picked 
out  ten  or  fifteen  and  sent  them  in.  The  others 
stood  around  with  serious  faces  and  then  drifted 
away. 

I  went  inside  the  factory.  The  raw  material  or 
semi-finished  product  was  coming  along  on  trolleys. 
One  man  performed  one  operation,  another  man 
another.  Some  highly  skilled  men  in  the  gang  were 
paid  50  cents  an  hour.  Some  of  them  seemed  to  be 
scarcely  exerting  themselves  at  all;  others  less  adept 
were  sweating.  If  any  man  did  not  do  his  part,  the 
work  piled  up  and  he  blocked  the  gang.  The  busi- 
ness of  the  foreman  was,  in  part,  to  piece  out  the  spots 
where  men  were  not  keeping  up,  or  else  fire  the  man 
and  put  in  someone  who  could  do  it  faster.  Common 
laborers  were  on  the  jump,  bringing  in  carts,  carrying 
away  the  finished  product. 

Later  I  attended  a  meeting  of  strikers  from  that 
establishment.  A  Bohemian  stood  up  and  made  a 
speech.  By  his  side  stood  a  Russian  Jew  who  trans- 
lated the  speech  into  English.  He  pledged  himself 
never  to  go  back  to  work  until  their  grievances 
were  settled.  He  claimed  that  they  could  not  make 
wages,  that  they  had  to  work  too  hard,  that  they 
had  to  pay  a  bonus  or  make  a  present  to  the  straw 


COMMODITY  3 

boss  in  order  to  keep  the  job.  It  seems  that  this 
strike  started  with  a  secret  union  of  skilled  men,  and 
five  thousand  unskilled  followed  them  out  without 
an  organization.  It  was  a  spontaneous  strike  without 
preliminary  discussion  in  public.  When  they  came 
together  afterward  for  a  joint  meeting,  it  was  neces- 
sary to  have  an  interpreter  whom  they  could  trust. 
That  man  was  the  Russian  Jew. 

I  went  through  the  establishment  and  came  across 
the  strike-breakers.  At  noon  time  I  found  a  group 
of  Macedonians  having  a  good  time  dancing  and 
playing  on  a  bag-pipe  made  of  goat's  skin  brought 
from  the  Balkan  Mountains.  The  padrone,  who 
was  in  charge,  could  speak  English,  and  told  me  of 
other  towns  where  they  had  been  used  as  strike- 
breakers. Negroes  also  were  brought  in,  from  the 
South.  The  strike  was  won,  but  immediately  a  sec- 
ond strike  was  called  on  account  of  alleged  discrimi- 
nation against  the  leaders.  Naturally  the  company 
decided  not  to  yield  again.  The  men  went  back  and 
their  union  went  to  pieces. 

I  visited  some  of  these  people  at  their  homes  and 
boarding  houses.  They  were  all  eager  to  save  money. 
That  was  their  main  ambition.  At  one  boarding 
house  was  a  big  board  table  without  any  table  cloth. 
In  the  middle  of  the  table  was  a  huge  bowl.  In  that 
bowl  were  pork,  cabbage,  carrots,  turnips,  onions,  a 
juicy  steaming  porridge.  Each  man  at  the  table 
had  his  own  smaller  bowl.  In  the  large  bowl  was 
a  great  ladle.  A  man  reached  over,  filled  his  bowl 
and  with  his  implements  went  to  work.  Beside  this 
great  bowl  were  huge  loaves  of  bread.  Each  man 
would  go  after  a  loaf  of  bread,  cut  off  what  was  about 


4  INDUSTRIAL  GOODWILL 

right  and  break  it  into  his  bowl.     They  were  sturdy, 
vigorous  peasants  from  the  hill  country  of  Europe. 

Then  I  went  into  their  sleeping  rooms.  One  room 
was  big  enough  to  hold  three  double  beds  crowded 
together.  In  that  room  six  men  slept,  and  they 
crawled  over  one  bed  to  gei  into  the  next  one.  They 
were  saving  money  to  send  for  their  families  or  to 
go  back  and  live. 

When  the  family  was  here  the  mother  was  taking 
in  boarders.  We  could  now  begin  to  talk  to  them 
without  an  interpreter.  They  would  tell  of  their 
native  country,  its  beauties,  and  tell  something  of 
the  conditions,  comparing  their  country  with  this. 
Usually  the  men  seemed  to  earn  about  five  times  as 
much  wages  as  they  could  earn  in  their  home  country, 
20  cents  a  day  there,  $1.00  a  day  here.  It  would 
cost  them  about  two  or  three  times  as  much  to  live 
here  as  there,  and  they  could  save  one-third  to  one- 
half  of  their  wages. 

It  was  their  ambition  to  buy  a  home  or  get  a  farm. 
Recently  I  talked  with  the  immigration  agent  of  the 
state  of  Wisconsin.  His  business  is  to  go  to  great 
manufacturing  centers  and  find  the  type  of  man  who 
has  saved  up  enough  money  to  buy  a  farm.  For 
eight  or  ten  years  he  has  frequently  seen  something 
like  the  following.  These  people  have  worked  for  a 
number  of  years  saving  up  money.  The  boy  has 
gone  to  work,  brought  home  money,  which  they  have 
put  in  the  bank.  The  girl  is  working  in  a  factory  or 
store.  She  has  turned  in  her  savings,  and  they  have 
accumulated  quite  a  sum  of  money.  They  see  an 
advertisement  in  one  of  the  foreign  language  papers. 
They  learn  of  glowing  possibilities  at  some  place  in 


COMMODITY  .1 

WUconsin  or  other  state.  They  connect  up  with  that 
place  and  its  land  agent.  They  buy  the  farm.  They 
place  a  mortgage  on  it  or  sign  a  land  contract.  They 
go  on  the  farm,  find  a  sandy  soil,  with  much  clearing 
to  be  done.  They  work  it  a  year  or  so  and  use  up 
their  money.  The  mortgage  is  foreclosed  and  they 
scatter  back  to  the  city.  It  is  the  business  of  this 
immigration  agent  of  the  state  of  Wisconsin  to  protect 
these  people  from  being  defrauded  when  they  buy  and 
settle,  and  this  he  is  doing  in  many  cases,  but  in 
others  he  is  thwarted  by  the  old  style  of  land  agent. 
When  these  settlers  go  back  to  the  city,  they  must 
have  work.  They  go  to  a  private  employment  office. 
The  employment  man  describes  in  attractive  terms 
a  job  where  they  will  find  work.  They  pay  a  fee  and 
pay  for  transportation.  Recently,  at  one  town  in 
Wisconsin,  thirteen  of  these  people  were  landed, 
sent  there  for  fake  jobs.  The  town  authorities  had 
to  send  them  back  to  the  city.  Finally,  these  people 
become  migratory  workers.  It  is  estimated  that  of 
the  migratory  workers  in  this  country  50  per  cent 
are  foreign  born. 

This  is  the  workings  of  what  I  call  the  commodity 
theory  of  labor.  Demand  and  supply  determine 
wages.  You  cannot  overcome  the  law  of  demand 
and  supply.  If  labor  is  scarce,  wages  will  go  up. 
If  labor  is  abundant,  wages  will  go  down.  The  ebb 
and  flow  of  the  labor  market  is  like  the  ebb  and  flow 
of  the  commodity  market. 

I  suppose  it  is  true  that  you  cannot  overcome  the 
law  of  supply  and  demand.  But  you  can  see  how  it 
works.  The  commodity  theory  of  labor  is  perhaps  the 
natural  way  for  the  merchant  to  look  at  it.  He  sits 


6  INDUSTRIAL  GOODWILL 

in  his  office,  sends  out  his  orders,  buys  finished  com- 
modities, buys  in  the  cheapest  market,  sells  in  the 
dearest.  He  does  not  necessarily  see  his  commodities. 
He  can  usually  buy  and  sell  by  samples.  Other  people 
might  look  at  it  differently.  A  member  of  the 
engineering  profession,  for  example,  might  naturally 
look  on  labor,  not  as  a  commodity,  but  as  a  machine. 


II 

MACHINERY 

That  which  is  bought  and  sold  is  not  labor  but  the 
product  of  labor.  If  the  worker  is  paid  by  the  day  or 
week  it  is  usually  because  his  product  cannot  be 
accurately  measured.  If  he  is  paid  by  the  piece  the 
employer  knows  exactly  what  he  is  buying  and  how 
much  he  is  paying  for  it.  Piece-work  furnishes 
accurate  knowledge  of  labor  costs  and  estimates  of 
future  costs. 

Furthermore,  piece-work  stimulates  the  worker  to 
greater  exertion  and  attention.  The  rough,  tradi- 
tional estimate  is  25  per  cent  greater  output  when 
paid  by  the  piece  than  when  paid  by  the  day. 

But  this  greater  output  has  many  individual 
differences.  One  man  earns  more  than  another  at 
the  same  piece-rate.  The  foreman's  business  is  to 
increase  output  and  keep  down  costs.  I  knew  a 
large  factory  of  non-union  laborers  where  every  new 
man  who  came  in  was  warned  by  the  others  not  to 
earn  more  than  a  certain  amount  of  money. 

I  knew  another  where  two  or  three  ambitious 
workers  refused  to  limit  their  output  on  this  mere 
warning  from  the  others,  and  then  the  others  organized 
a  union,  demanded  the  closed  shop,  won  their  demand, 
then  reduced  the  output  of  every  member  so  that 
no  one  would  earn  more  than  the  amount  of  wages 

7 


8  INDUSTRIAL  GOODWILL 

that  they  thought  the  superintendent  had  in  mind 
when  he  cut  the  piece-rates. 

I  knew  still  another  where  the  president  of  the  cor- 
poration vigorously  denied  in  public  that  piece-rates 
were  ever  cut  in  his  plant,  and  yet  the  foremen  were 
cutting  them  right  along. 

These  cases  are  not  exceptional;  they  are  only  illus- 
trations of  what  is  universal.  Indeed,  piece-rates 
must  be  cut,  sooner  or  later,  or  else  either  industry  will 
stagnate,  or  wage-earners  will  get  all  of  the  gain  from 
improvements  and  none  will  go  to  the  consumer  and 
the  employer,  or  else  the  employer  will  be  driven  out 
of  business  by  competition. 

Piece-rate  cutting  is  universal.  What  is  meant 
when  it  is  denied  is  perhaps  that  the  cutting  is  not 
done  arbitrarily.  This  is  a  question  of  fact,  of  defini- 
tion, of  opinion.  The  cutting  must  be  done — the 
question  is  how  and  how  often. 

Twenty  years  ago  many  varieties  of  premium  or 
bonus  systems  of  paying  wages  began  to  be  invented 
by  engineers  in  order  to  abolish  automatically  the 
arbitrary  cutting  of  piece-rates.  Mr.  F.  S.  Halsey, 
in  1902,  stated  the  situation.1  "From  the  nature 
of  the  day's-work  plan  the  workman  has  no  direct 
share  in  any  increased  production  which  he  may  bring 
about  by  more  intelligent  or  increased  exertion,  the 
benefits  of  such  increase  going  wholly  to  the  employer. 
.  .  .  From  the  nature  of  the  piece-work  plan,  on  the 
contrary,  the  employer  has  no  direct  share  in  any 
increased  production  which  the  workman  may  bring 
about  by  more  intelligent  or  increased  exertion.  .  .  . 

1  Sibley  Journal  of  Mechanical  Engineering,  Vol.  XVI,  March,  1902. 
Reprinted  in  Commons,  Trade  Unionism  and  Labor  Problems,  p.  274. 


MACHINERY  9 

In  consequence,  community  of  interest  between 
employer  and  employee  in  the  reduction  of  costs  is 
impossible.  ...  It  is  this  which  it  is  the  prime 
object  of  the  premium  plan  to  supply." 

Mr.  Halsey  called  the  piece-work  system  a  "  system 
of  punishment  for  doing  well."  The  workman  looks 
upon  these  cuts  in  piece-rates  as  "an  exhibition  of 
pure  hoggishness  on  the  part  of  the  employer/' 
but  they  are,  he  says,  "an  integral  part  of  the  piece- 
work plan,  which  can  no  more  be  operated  without 
them  than  a  windmill  can  be  operated  without  wind, 
for  the  reason  that  as  the  years  go  by  the  whole 
tendency  of  prices  is  downward." 

The  premium  plan,  with  its  various  modifications 
under  the  name  of  "bonus,"  "differential  piece-rates" 
and  so  on,  have  this  feature  in  common,  that  they  are 
designed  automatically  to  split  the  difference  between 
the  workman's  desire  for  a  minimum  wage  and  the 
employer's  desire  for  a  maximum  output. 

The  workman  has  certain  minimum  costs  of  living 
determined  by  his  standard  of  living  and  the  customs 
of  the  class  with  which  he  associates.  Like  the  coal 
and  oil  and  wear  and  tear  of  a  machine,  these  must  be 
met,  no  matter  how  inefficient  he  may  be.  So,  the 
minimum  wage  per  day  is  guaranteed,  even  though  the 
product  at  the  piece-rate  would  yield  less  than  that 
minimum. 

On  the  other  hand,  if  every  one  is  paid  this  minimum, 
there  is  no  direct  inducement  for  a  man  of  ability  and 
ambition  to  exceed  it.  Yet  the  ambitious  man  does 
not  need  as  high  a  rate  as  the  uniform  piece-rate  in 
order  to  induce  him  to  exceed  it.  Furthermore,  the 
employer  also  needs  inducement  to  lead  him  to  fix 


10 


INDUSTRIAL  GOODWILL 


up  his  machinery  and  organization  so  that  the  work- 
man will  exceed  the  minimum.  Hence  the  differential 
piece-rate,  the  bonus,  or  the  premium  on  increased 
output,  so  that  the  worker  and  the  employer  may 
share  between  them  the  gain  from  increased  efficiency. 
The  worker  gets  his  minimum  wage  and  a  bonus  for 
extra  output.  The  employer  gets  a  lower  average 
cost  in  wages  the  larger  the  bonus  or  premium  earned 
by  the  worker.1  Community  of  interest  is  auto- 
matically established.  The  foreman's  inducement  to 
cut  the  piece-rate  has  been  eliminated,  because  the 
rate  has  already  been  cut  by  agreement  in  advance. 
The  workman's  inducement  to  increase  his  output  is 
assured,  for,  by  accepting  something  less  than  the  old 
piece-rate,  he  does  not  expect  to  be  punished  for 
earning  it. 

1  Mr.  Halsey  gives  the  following  illustration  of  the  workings  of 
the  premium  plan  where  the  workman  is  paid  a  minimum  of  $3.00 
a  day  of  ten  hours,  during  which  he  produces  1  piece,  and  is  paid  a 
premium  of  10  cents  for  each  hour  saved.  Of  course,  the  "premium  " 
on  hours  saved  for  a  given  product  works  out  the  same  as  a  "bonus" 
on  amount  of  -product  increased  for  a  given  number  of  hours. 

THE  WORKINGS  OP  THE  PREMIUM  PLAN 


1 

2 

3 

4 

5 

Time 

consumed, 
hours 

Wages  per 
piece 

Premium 

Total  coat  of  work  - 
Column  2  +  Column  3 

Workman's  earnings 
per  hour  ™  Column  4 
-*•  Column  1 

10 

$3.00 

$0.00 

$3.00 

$0.30 

9 

2.70 

0.10 

2.80 

0.311 

8 

2.40 

0.20 

2.60 

0.325 

7 

2.10 

0.30 

2.40 

0.343 

6 

1.80 

0.40 

2.20 

0.366 

5 

1.50 

0.60 

2.00 

0.40 

Commons,  Trade  Unionism  and  Labor  Problems,  p.  279. 


MACHINERY  11 

There  are  two  variables  in  this  ingenious  industrial 
psychology.  First  is  the  base  rate,  which  we  call 
the  task;  second  is  the  bonus  or  premium  rate  for 
exceeding  the  task. 

The  early  industrial  psychologists,  like  Mr.  Halsey, 
directed  attention  to  the  bonus  rate.  They  were 
endeavoring  to  find  a  plan  by  which  to  lessen  the 
temptation  of  the  employer  to  cut  the  piece-rate. 
So  they  cut  it  in  advance  by  making  the  premium 
rate  say,  50  per  cent  or  30  per  cent  of  the  basic  piece- 
rate.  The  straight  piece-rate  would  be  a  bonus  rate 
of  100  per  cent  on  the  base  rate.  But  if  the  bonus 
rate  is  50  per  cent  of  the  base  rate,  then  the  temptation 
to  cut  it  is  reduced  50  per  cent.  If  the  bonus  rate  is 
30  per  cent  of  the  straight  piece-rate,  then  the  tempta- 
tion to  cut  it  is  reduced  70  per  cent,  and  so  on. 

This  psychology  turned  out  to  be  misdirected,  and 
the  premium  system  as  thus  portrayed  broke  down. 
The  temptation  to  cut  the  rate  did  not  reside  in  the 
bonus  but  in  the  task.  I  knew  an  establishment 
which  introduced  this  premium  system  on  an  exten- 
sive scale.  A  man  was  given  a  job  of  say,  100  pieces 
at  $3.00,  and  a  bonus  of  33Ji  per  cent.  If  he  doubled 
his  output  he  would  earn  $4.00  a  day  and  the  labor 
cost  to  the  employer  would  come  down  from  3  cents 
apiece  to  2  cents  apiece.  But  he  went  to  work  with 
ambition  and  ingenuity.  He  fixed  up  his  machine 
and  laid  out  his  work.  Eventually  he  was  making 
some  $7.00  a  day.  To  do  this  he  had  increased  his 
output,  not  two-fold,  but  five-fold.  Then  came  the 
cut,  not  in  the  bonus  rate  but  in  the  task  rate.  He 
received  a  surprise  in  the  shape  of  a  change  in  the 
job  order.  Instead  of  100  pieces  at  $3.00  it  became 


12  INDUSTRIAL  GOODWILL 

200  pieces  at  $3.00,  and  the  same  bonus  rate  of  83H 
per  cent.  He  had  to  turn  out  twice  as  much  product 
before  he  could  begin  to  earn  the  bonus  on  extra 
product. 

So  the  bonus  rate  is  immaterial.  The  fear  that  the 
employer  would  cut  the  bonus  rate  was  misplaced. 
The  bonus  rate  is  merely  an  inducement  to  exceed  the 
task,  and  it  makes  but  little  difference  whether  it  is 
30  per  cent  or  50  per  cent  or  even  100  or  150  per  cent. 
The  essential  thing  is  the  base  rate  which  determines 
the  task.  This  is  just  as  essential  in  straight  piece- 
work as  it  is  in  the  premium  or  bonus  system. 

Here  is  where  scientific  management  came  in.  Mr. 
Frederick  Taylor  made  the  next  great  step  in  advance. 
He  directed  his  investigations,  not  to  the  bonus  rate 
or  premium  rate,  but  to  the  task  or  base  rate  which 
should  be  required  before  the  premium  or  bonus 
could  begin.  With  the  task  correctly  ascertained  he 
even  advocated  a  differential  piece-rate  as  high  as 
150  per  cent  of  the  task  rate  as  an  inducement  to 
exceed  the  output  ascertained  for  the  task,  and  a  dif- 
ferent rate,  lower  than  the  task  rate,  as  an  additional 
penalty  for  not  coming  up  to  the  task. 

With  this  new  view  of  the  matter  we  get  back  to 
the  true  nature  of  piece-work  described  by  Mr. 
Taylor  as  a  task-and-bonus  system.  Under  the 
premium  or  bonus  system  the  employer  will  not  for 
long  keep  a  workman  who  does  not  earn  the  minimum 
wage.  The  minimum  wage  becomes  the  task.  The 
profitable  employees  are  those  who  earn  more  than  the 
minimum.  The  same  is  true  on  straight  piece-work. 
Piece-work  is  also  a  task-and-bonus  system,  but 
with  the  bonus  fixed  at  100  per  cent  of  the  piece-rate. 


MACHINERY  13 

But  the  task  is  uncertain.  Mr.  Taylor's  great 
contribution  to  the  subject  was  that  of  accurately 
measuring  the  task  in  advance,  instead  of  leaving  it 
to  the  hit-or-miss,  cut-and-try,  methods  of  the  old 
style  piece-work  practice.  Scientific  management, 
applied  to  labor,  is  scientific  measurement  of  the 
laborer's  task  required  to  hold  the  job. 

With  this  new  idea  there  is  no  difference  between 
piece-work  and  the  premium  and  bonus  systems  except 
in  the  very  minor  difference  of  the  rate  of  premium. 
Whether  it  be  Mr.  Halsey's  33}^  per  cent  or  Mr. 
Taylor's  150  per  cent,  or  even  straight  piece-work 
which  is  100  per  cent  of  the  base  rate,  is  a  small  mat- 
ter. They  are  just  different  rates  of  premium  or 
bonus  on  the  amount  of  work  a  man  does  over  the 
task.  The  task  is  the  real  thing  and  the  only  thing 
that  needs  scientific  investigation. 

The  first  practical  application  of  this  important 
distinction  between  the  task  and  the  bonus  or  pre- 
mium was  that  of  taking  the  authority  to  make 
piece-rates  away  from  the  foremen  and  placing  it 
in  the  hands  of  investigators. 

The  foreman  is  not  an  inventor  or  investigator. 
He  has  come  up  from  the  ranks.  He  operates 
according  to  habit  and  tradition.  He  does  not  know 
much  about  the  possibilities  of  improved  processes 
and  short  cuts.  More  than  that,  he  is  busy  in  getting 
out  product.  He  must  get  men  to  work  and  he  must 
keep  down  costs.  If  he  makes  a  mistake  in  setting 
the  piece-rate  too  low  he  cannot  get  the  workmen; 
if  he  sets  it  too  high  they  will  earn  too  much.  It  was 
these  miscalculations  that  broke  down  the  premium 
system  as  first  applied,  just  as  they  had  broken 


14  INDUSTRIAL  GOODWILL 

down  the  piece-work  system  which  it  was  hoped  the 
premium  system  would  correct. 

If  the  rate-fixing  is  taken  away  from  foremen  it 
can  be  placed  in  the  hands  of  experts,  inventors, 
investigators.  They  can  study  the  possibilities  of 
each  job.  They  can  study  waste  motions  and  short 
cuts.  They  can  standardize  the  job  according  to  the 
easiest  and  quickest  method  of  doing  the  work. 
They  can  employ  the  accurate  methods  of  measure- 
ment which  distinguish  science  and  engineering  from 
rule-of- thumb.  They  can  make  time-and-motion 
studies,  and  set  up  specifications  for  the  foreman 
and  workman  to  follow.  They  can  study  each  work- 
man and  select  those  who  are  fitted  to  each  job. 

This  I  call  the  machinery  theory  of  labor.  Labor 
is  not  a  commodity — its  value  determined  by  demand 
and  supply — but  each  laborer  is  a  machine — its  value 
determined  by  the  quantity  of  its  product.  The 
theory  is  not  new.  Its  application  is  a  new  discovery 
in  science  and  engineering.  The  commodity  theory 
is  the  merchant's  theory  of  buying  and  selling.  The 
machinery  theory  is  the  engineer's  theory  of  economy 
and  output.  Man  is,  after  all,  the  most  marvelous 
and  productive  of  all  the  forces  of  nature.  He  is  a 
mechanism  of  unknown  possibilities.  Treated  as  a 
commodity,  he  is  finished  and  ready  for  sale.  Treated 
as  a  machine,  he  is  an  operating  organism  to  be 
economized. 

The  application  of  this  theory  by  the  engineer  is 
perhaps  the  most  productive  invention  in  the  history 
of  modern  industry.  The  steam  engine,  electricity, 
chemistry,  scientific  agriculture,  have  done  much  to 


MACHINERY  15 

ft 

increase  man's  power  over  nature.  But  machinery 
and  factory  organization  are  continually  approaching 
a  limit  of  diminishing  returns.  This  limit  turns  atten- 
tion to  the  human  factor,  and  it  needs  only  a  candid 
attention  to  the  experiments  of  scientific  management 
to  become  convinced  of  the  large  resources  and  unused 
possibilities  within  the  human  animal  which  can  be 
developed  when  once  his  motions  and  energies  are 
studied  and  measured  as  the  engineer  studies  and 
measures  the  other  forces  and  materials  used  in  pro- 
duction.1 It  differs  from  the  others  in  that  the 
science  of  industrial  psychology  is  added  to  the 
mechanical  and  biological  sciences,  and  inducement 
is  nicely  adjusted  to  output  through  ingenious  meas- 
urements of  compensation. 

Other  inventions  and  improved  processes  have  been 
opposed  and  resisted  in  the  past  by  workingmen,  just 
as  this  is  more  or  less  resisted.  But  if  we  may  judge 
by  what  has  happened  in  the  past,  the  cheaper  and 
more  productive  processes  will  win  out  by  the  mere 
force  of  competition.  The  workingmen  who  resist 
successfully  gain  an  empty  victory,  for  their  employers 
cannot  compete  with  the  others,  and  while  they  gain 
their  point  for  a  time,  they  lose  their  jobs  eventually. 

Their  resistance  is  logical,  for  scientific  management 
carries  to  the  final  limit  that  disintegration  of  the 
workman's  skill  and  its  transfer  to  the  employer, 
which  began  a  hundred  and  fifty  years  ago  with  the 
inventions  of  power  machinery,  the  steam  engine, 
and  division  of  labor.  The  ancient  craft  gilds  were 
rightly  known  as  "  mysteries."  The  member  of  the 

1  Especially  the  writings  of  Taylor,  Gilbreth,  Gantt,  Emerson, 
Thompson. 


16  INDUSTRIAL  GOODWILL 

gild  learned  through  his  apprenticeship  a  skill  in 
manufacture  unknown  and  unpractised  by  outsiders. 
This  mystery  was  his  vested  right— his  property 
against  all  the  world.  But  when  machinery  or 
division  of  labor  took  the  place  of  his  skill,  his 
property-right  went  with  it  to  his  employer  who 
owned  the  machine. 

Scientific  management  carries  the  process  a  step 
further.  The  time-and-motion  studies,  the  blue  prints 
and  specifications,  the  detailed  instructions  how  to  do 
the  work,  become  the  property  of  the  employer, 
and  the  mechanic  no  longer  hands  down  by  word 
of  mouth  and  by  example  the  mystery  of  his  skill. 
Where  mechanical  inventions  transferred  ownership 
of  skill  to  the  employer  through  ownership  of  the 
machine,  scientific  management  transfers  it  through 
blue  prints  and  job  studies  made  by  a  staff  of  engineers 
and  specialists  on  the  staff  of  the  employer. 

Naturally,  as  before,  the  mechanic  resists,  but 
insofar  as  scientific  management  materially  reduces 
costs  by  increasing  output  this  resistance  will  be 
gradually  undermined  and  the  mechanic  will  learn, 
as  he  has  to  some  extent  in  the  case  of  machinery, 
to  recoup  in  other  directions. 


Ill 

GOODWILL 

The  machinery  theory,  like  the  commodity  theory 
of  labor,  is  not  false,  it  is  incomplete.  You  cannot, 
it  is  true,  overcome  the  law  of  supply  and  demand. 
But  you  can  modify  it,  if  you  know  how,  within  limits. 
You  cannot  permanently  withstand  those  improve- 
ments which,  by  enlarging  output,  reduce  costs,  but 
you  can  limit  the  improvement  itself  at  the  point 
beyond  which,  if  carried  too  far,  it  increases  costs 
elsewhere  more  than  it  continues  to  reduce  them. 
Successful  business  is  always  a  scheme  of  finding 
that  correct  proportion  of  different  factors  which  brings 
the  largest  net  income  from  all  of  them  together. 

At  the  moment  when  scientific  management  was 
achieving  an  evident  success,  another  source  of  cost, 
less  tangible  but  equally  important,  began  to  receive 
scientific  investigation.  This  attention  came  first, 
not  from  industry  or  engineers,  but  from  the  field 
of  vocational  education.  The  Vocation  Bureau  of  Bos- 
ton, unable  to  place  its  boys  in  permanent  jobs  where 
their  training  could  be  continued  after  leaving  school, 
brought  the  matter  before  the  employment  agents  of 
several  corporations.  Out  of  these  conferences  devel- 
oped the  Employment  Managers'  Association  of 
Boston,  with  its  scientific  study  of  labor  turnover.1 

1  Bulletin  of  the  United  States  Bureau  of  Labor  Statistics,  Number 
196,  p.  42. 

2  17 


18  INDUSTRIAL  GOODWILL. 

Spontaneously,  elsewhere,  this  hitherto  unmeasured 
cost  of  labor  received  attention,  and  when,  by  a  bold 
stroke  of  genius  rather  than  science,  the  Ford  Motor 
Company  doubled  its  wages,  but  nevertheless  increased 
its  profits  by  the  mere  reduction  in  cost  of  labor  turn- 
over, it  became  evident  to  all  that  the  intangible  good- 
will of  labor  may  be  as  profitable  as  the  scientific 
management  of  labor. 

The  laborer  is  not  only  a  productive  machine,  he 
is  a  customer.  The  employer  is  not  only  buying  his 
time  or  his  product,  but  is  also  selling  to  him  a  job 
where  he  can  earn  a  living.  The  employer  makes  a 
certain  investment  on  behalf  of  every  customer 
and  every  employee.  He  furnishes  something  in 
exchange,  and  he  not  only  wants  that  customer  or 
worker  to  return,  satisfied  with  his  treatment,  but 
also  to  spread  the  word  and  bring  others.  Goodwill 
is  good  reputation,  and  reputation  is  the  collective 
opinion  of  those  whose  patronage  is  desired. 

The  engineer  treats  each  laborer  as  a  separate  indi- 
vidual. This  is  indeed  necessary  and  right,  for  he  is 
such.  One  machine  is  not  as  good  as  another.  One 
is  fitted  for  one  kind  of  work,  another  for  another 
kind.  Selection  of  individuals  is  the  first  step  in 
scientific  management.  So  it  is  in  scientific  goodwill. 
But  it  is  more. 

Scientific  management  picks  out  the  individual  and 
offers  him  the  inducement  of  making  more  money. 
It  separates  him  out  from  the  group  with  which  he 
has  consciously  or  unconsciously,  perhaps,  identi- 
fied himself.  It  cuts  across  the  solidarity  of  labor  as 
a  class,  unmindful  that  the  laborers  are  competitors 
with  each  other,  that  they  are  buying  jobs  which  they 


GOODWILL  19 

feel  are  limited  in  supply,  and  that  their  feeling  of 
solidarity  on  this  account  reprehends  the  one  who 
injures  his  fellows  by  lessening  their  chances  for  jobs, 
or  who  reduces  the  level  of  compensation  for  all  by 
his  self-seeking  competition. 

But  the  goodwill  of  labor  is  a  collective  goodwill 
that  does  not  play  one  laborer  against  another,  or 
the  unemployed  against  the  employed,  or  take 
advantage  of  the  needs  of  a  class,  but  acknowledges 
labor's  solidarity  of  interest  as  well  as  the  individual 
laborer's  self-interest. 

Scientific  management,  since  it  begins  and  ends 
with  individuals  separated  from  their  fellows,  has  the 
defects  of  autocracy.  It  means  government  by 
experts.  An  expert  comes  into  the  factory  and  makes 
a  study  of  the  operations  of  the  selected  individual. 
That  individual  and  his  fellow-workers  are  much  con- 
cerned about  his  time  studies,  his  stop-watch,  his 
cold  calculations,  which  decide  for  them  the  amount 
of  work  that  shall  be  portioned  out  for  the  task. 
But  they  cannot  be  consulted.  They  are  objects  to 
be  investigated,  not  investigators. 

But  goodwill  is  reciprocity.  It  is  not  government 
at  all,  but  mutual  concession.  It  yields  as  much  to 
the  prejudices  and  passions,  to  the  conservatism  and 
even  suspicions  of  patrons  as  it  does  to  scientific 
knowledge  of  what  is  good  for  them.  Goodwill  is 
not  necessarily  a  virtuous  will,  or  a  loving  will,  it  is 
a  beneficial  reciprocity  of  wills,  and  whether  there  is 
really  a  benefit  or  really  a  reciprocity,  is  a  matter  of 
opinion  and  mutual  good  feeling  as  much  as  a  matter 
of  science. 

Goodwill  is  productive,  not  in  the  sense  that  it  is 


20  INDUSTRIAL  GOODWILL 

the  scientific  economizing  of  the  individual's  capaci- 
ties, but  because  it  enlists  his  whole  soul  and  all  his 
energies  in  the  thing  he  is  doing.  It  is  that  unknown 
factor  pervading  the  business  as  a  whole,  which  cannot 
be  broken  up  and  measured  off  in  motions  and  parts 
of  motions,  for  it  is  not  science  but  personality.  It 
is  the  unity  of  a  living  being  which  dies  when  dis- 
sected. And  it  is  not  even  the  personality  of  a  single 
individual,  it  is  that  still  more  evasive  personality  to 
which  the  responsive  French  give  the  name,  V esprit  de 
corps,  the  spirit  of  brotherhood,  the  solidarity  of  free 
personalities. 

It  is  this  corporate  character  of  goodwill  that  makes 
its  value  uncertain  and  problematical.  A  corporation 
is  said  to  have  no  soul.  But  goodwill  is  its  soul. 
A  corporation  owns  its  goodwill,  and  the  value  of 
goodwill  is  reflected  in  its  stocks  and  bonds.  It  is 
the  soul  of  a  going  concern,  the  value  of  the  unity 
and  collective  personality  that  binds  together  all  its 
parts  hi  a  living  organism. 

The  engineer  or  employer  can  tell  exactly  what  is  the 
labor-cost  of  a  single  operation.  The  piece-rate  shows 
that.  But  the  cost  of  the  labor  turnover  is  an  over- 
head cost  that  takes  into  account  every  relation  of 
employer  and  employee.  It  can  be  ascertained  only 
by  the  uncertain  estimates  of  cost  accounting.  The 
scientific  study  of  goodwill  is,  first  of  all,  the  accurate 
analysis  of  turnover  and  the  apportionment  of  overhead 
costs  to  each  element.  When  estimates  vary  as  widely 
as  they  do  at  present,  from  $5.00  for  common  labor, 
to  $400.00  for  motormen,  as  the  cost  of  losing  a  man 
and  getting  another  fitted  into  his  place,  it  is  evident 
that  the  scientific  study  of  goodwill  is  yet  only  in  its 


GOODWILL  21 

theoretical  stage.  And  it  can  never  be  other  than  an 
estimate  of  costs  depending  largely  on  the  bias  of  the 
cost  accountant.  For,  look  at  the  many  elusive  items 
to  be  taken  into  account  in  estimating  the  overhead 
cost  of  labor  turnover,  such  as  cost  of  hiring,  of  train- 
ing the  new  worker,  of  extra  power,  of  lost  profits,  of 
fixed  charges  on  plant  while  learning,  of  spoiled  work, 
of  extra  wear  and  tear  of  machinery,  of  accidents  to 
green  employees,  of  loss  of  business  on  account  of 
defective  product,  and  so  on.1 

It  is  this  unmeasured  quality  of  goodwill  that 
scientific  managers  are  feeling  after  when  they  explain 
the  breakdown  of  scientific  management.  Mr.  Taylor 
explains  it  by  saying  that  employers  are  too  hasty 
for  profits  and  are  not  willing  to  wait  for  the  slow 
and  patient  work  of  science.2  Mr.  Hoxie  points  out 
that  of  the  thirty  or  forty  establishments  picked  out 
by  scientific  managers  and  recommended  to  him  for 
investigation  only  two  or  three  had  carried  out  com- 
pletely the  patient  trials,  tests,  experiments,  upon 
which  alone  can  science  be  called  scientific.8  Before 
time-and-motion  studies  are  even  begun  with  the 
workmen,  two  or  three  years  may  be  needed  to  bring 
about  the  proper  engineering  revision  of  the  physical 
plant.  Not  until  that  is  accomplished  is  the  truly 
scientific  manager  ready  to  enter  the  field  of  labor's 
habits,  traditions,  prejudices  and  old-fashioned  ways 
of  doing  things. 

Even  then,  the  expert  is  only  an  adviser.     He  is  an 

1  The  most  complete  and  critical  study  of  the  statistics  is  that 
recently  made  by  Sumner  Slichter  in  The  Turnover  of  Factory  Labor, 
Appleton,  1919. 

1  Taylor,  Principles  of  Scientific  Management,  pp.  128-135. 

1  Hoxie,  Scientific  Management  and  Labor,  p.  29. 


22  INDUSTRIAL  GOODWILL 

outsider  without  authority.  It  is  the  employer  who 
installs  the  devices  and  controls  their  use.  So, 
scientific  managers  reach  the  point  where  they 
instruct,  not  the  workman,  but  the  employer.  They 
urge  him  to  give  to  the  scientific  man  authority  in  his 
establishment.  The  employer  should  give  up  his  desire 
for  immediate  profits  and  should  abdicate  in  favor  of 
the  scientific  engineer.  The  autocratic  method  breaks 
down  at  the  point  where  profits  without  science  take 
control  of  the  worker. 

It  is  this  that  stands  in  the  way  of  any  automatic 
solution  of  the  labor  problem  that  the  engineer  may 
devise.  He  can  fashion  a  machine  or  lay  out  a  factory 
and  then  go  away  and  leave  it  to  work  according  to 
its  inherent  forces.  So  he  fixes  up  a  scheme  of  nicely 
adjusted  measurements  and  inducements  by  which 
he  expects  the  human  machine  to  turn  out  a  product. 
Then  he  goes  away  and  leaves  it  to  the  employer  to 
operate,  in  confidence  that  he  has  invented  an  auto- 
matic solution  of  the  labor  problem. 

This  might  suffice  if  he  could  tie  up  the  worker  by 
a  contract  that  would  hold  him  to  work,  no  matter 
what  changes  subsequently  occur.  But  the  labor 
contract  is  not  automatic  and  is  not  enforceable 
according  to  specifications.  It  is  a  new  contract  every 
day  and  every  hour.  It  is  the  only  contract  that  is 
not  sacred.  If,  when  a  man  is  hired  for  a  period  of 
time,  he  could  be  compelled  to  fulfill  his  contract, 
the  result  would  be  involuntary  servitude.  On  the 
other  hand,  if  an  employer  is  compelled  to  keep  a 
man  according  to  contract,  then  the  employer  might 
be  compelled  to  have  on  his  hands  a  man  not  suited 
to  his  work  or  not  willing  to  work.  So,  in  the  last 


GOODWILL  23 

forty  years,  since  the  Thirteenth  Amendment  to  the 
Constitution,  the  labor  contract  has  become  univer- 
sally, except  in  the  case  of  certain  professional  services, 
a  contract  terminable  at  will  without  damages  col- 
lectible in  court.  The  workman  can  be  fired  at  any 
hour  of  the  day  and  he  can  quit  at  any  hour,  regard- 
less of  what  promise  has  been  made  and  without  a 
legal  penalty.  So  the  labor  contract  is  new  at  every 
turn  of  the  work  that  is  being  done.  The  laborer  is 
bargaining  while  he  is  working,  and  his  tacit  offer 
to  the  employer  is  the  amount  of  work  he  is  turning 
out.  If  the  employer  accepts  the  offer  he  keeps  him 
at  work.  If  the  employer  wants  a  different  contract 
the  old  one  is  already  terminated  by  the  very  words 
that  suggest  a  change  in  the  amount  of  work. 

Scientific  managers  have  sometimes  tried  to  meet 
this  situation  by  stipulating  that  prices  and  pre- 
miums once  set  shall  never  be  changed.  But  this  is 
impossible,  and  such  a  promise  must  be  broken.  Good 
faith  may  possibly  be  kept  with  a  certain  individual 
even  though  he  may  double  and  treble  his  wages 
unexpectedly.  Even  that  is  unlikely.  When  he  leaves 
his  job,  when  another  takes  his  place,  when  unemploy- 
ment breaks  the  connection,  the  moral  obligation  may 
be  deemed  fulfilled.  A  new  contract  is  made,  a 
different  price  is  set.  The  individual  promise  may 
not  be  violated  but  the  contract  changes  with  indi- 
viduals. The  promise  made  to  one  does  not  hold 
with  his  successor,  nor  even  with  him  if  the  job 
changes. 

Generally,  instead  of  a  promise  that  the  price  shall 
never  be  changed  the  promise  is  made  that  it  shall 
hold  for  a  year.  This  is  about  as  far  as  the  promise  can 


24  INDUSTRIAL  GOODWILL 

go.  Even  then,  the  daily  work  and  wages  are  the 
tacit  offers  made  in  advance  and  in  contemplation  of 
their  effect  on  the  new  bargain  when  it  comes  to  be 
made.  There  must  be  a  change  sooner  or  later. 
Industry  is  improving,  and  if  no  change  is  made  in 
the  contract,  the  worker  gets  the  sole  benefit  of  prog- 
ress at  the  expense  of  capital  or  the  consumer.  On 
the  other  hand,  competition  forces  the  employer  to 
cut  the  rates  or  go  out  of  business. 

So,  for  these  reasons,  an  automatic  system  designed 
as  an  ultimate  solution  to  wind  up  the  labor  problem 
and  let  it  work  itself  out  is  impossible.  The  labor 
problem  is  a  daily  trial  of  strength.  The  socialists 
call  it  a  class  struggle.  It  is  a  continuous  bargain 
every  day  and  hour,  renewed  either  in  the  prices  that 
are  to  be  paid  or  the  amount  of  product  that  the 
worker  turns  out.  And  it  is  this  very  renewal  of 
bargains  that  constitutes  goodwill  in  law  and  in  fact. 

Goodwill  is  the  offspring  of  liberty  and  grows  in 
importance  as  liberty  enlarges.  The  slave-owner  does 
not  depend  on  goodwill,  else  he  would  emancipate 
his  slaves.  When  the  labor  contract  was  enforced 
in  law,  the  crime  of  running  away  was  the  employer's 
substitute  for  goodwill.  And  if  the  employer's 
competitors  do  not  have  access  to  his  laborers,  in 
order  to  give  them  information  about  alternative 
offers,  it  is  not  their  goodwill  that  he  depends  upon, 
but  their  ignorance. 

For  goodwill  is  competitive  persuasion.  It  is 
knowledge  of  alternatives  and  freedom  to  choose 
them  without  penalty  or  sacrifice.  If  there  are  no 
alternatives,  or  no  knowledge  of  them,  there  is  no 
goodwill.  In  prosperous  times,  when  alternatives 


GOODWILL 

are  numerous,  the  turnover  increases.  In  hard  times 
it  is  reduced.  In  prosperous  times,  too,  the  workers 
reduce  their  output.  In  hard  times  they  work 
harder.  And  this  is  the  curious  paradox  of  modern 
industry  and  of  the  supply-and-demand  theory  of 
labor,  that  in  hard  times  when  there  is  already  an 
overproduction  of  products  relative  to  demand,  the 
workers  still  further  increase  the  overproduction  by 
working  harder;  while  in  good  times  when  demand 
outruns  supply,  the  workers  intensify  the  undersupply 
by  still  further  reducing  output.  The  manufacturer 
or  merchant  reduces  his  output  when  there  is  an 
oversupply  on  the  market,  but  the  wage-earner 
increases  his,  and  vice  versa.  Commenting  on  this 
situation  during  a  period  of  prosperity  a  great 
employer  once  said  to  me,  "  Yes,  these  fellows  will  not 
work  now,  but  hard  times  will  come  and  then  we  will 
soak  them. "  With  such  a  theory  and  such  conditions 
it  is  fear  rather  than  goodwill,  retaliation  rather  than 
reciprocity,  servility  rather  than  freedom,  that  gov- 
erns labor's  production  of  wealth.  Scientific  manage- 
ment has  made  a  great  advance  away  from  this  com- 
modity theory  and  its  results.  To  the  scientific 
study  of  goodwill  and  labor  turnover  we  must  look  for 
a  still  greater  advance. 

For  goodwill  is  coming  to  be  an  intangible  asset  of 
business  more  valuable  than  the  tangible  properties. 
It  is  the  life  of  a  going  concern.  Business  goodwill, 
commercial  goodwill,  trade  name,  trade  reputation, 
trade  marks,  often  exceed  in  value  the  physical 
plant  and  the  inventory  of  stock  on  hand.  Goodwill 
is  valuable  because  it  lifts  the  business  somewhat 
above  the  daily  menace  of  competition  and  enables 


26  INDUSTRIAL  GOODWILL 

it  to  thrive  without  cutting  prices.  And  what  is 
"good  credit"  but  the  goodwill  of  bankers  and 
investors? 

So  industrial  goodwill  is  a  valuable  asset  like  com- 
mercial goodwill  and  good  credit,  and  becomes  so, 
more  and  more,  in  proportion  as  laborers  acquire  more 
liberty,  power,  intelligence  and  more  inclination  to 
assert  their  liberties.  It  too  is  valuable  because  it 
brings  larger  profits  and  lifts  the  employer  somewhat 
above  the  level  of  competing  employers  by  giving 
him  a  more  productive  labor  force  than  theirs  in 
proportion  to  the  wages  paid.  And  this  larger 
profit  reflects  itself  in  the  larger  value  of  stocks  and 
bonds,  the  higher  capitalization  of  the  going  business. 
Goodwill  is  the  expectation  of  future  profit,  and 
whether  it  be  the  commercial  goodwill  of  patrons  and 
customers,  or  the  credit  goodwill  of  bankers  and 
investors,  or  the  industrial  goodwill  of  laborers, 
it  has  its  present  market  value,  sometimes  greater 
than  the  value  of  all  the  tangible  property  of  the 
business.  Indeed,  without  goodwill,  the  tangible 
property  is  a  liability  rather  than  an  asset. 

But  goodwill  is  fragile  as  well  as  intangible.  It  is 
not  merely  past  reputation,  it  requires  continuous 
upkeep  through  continuous  repetition  of  service. 
It  breaks  down  easily  by  deterioration,  for  it  is  built 
up  on  the  most  fragile  of  assets,  the  freedom  of  the 
will  of  patrons  or  workers.  It  cannot  be  wound 
up  and  allowed  to  run  itself  like  a  machine.  It  is 
not  an  exclusive  monopoly  protected  by  law  like  a 
patent  right.  It  is  not  even  a  contract  enforceable 
in  law.  It  is  just  the  intangible  chance  of  making  a 
contract  if  you  can.  It  is  menaced  by  competitors 


GOODWILL  27 

who  are  perhaps  just  as  free  and  able  as  the  owner 
to  build  up  their  own  goodwill  by  making  contracts, 
and  only  the  employer  who  seriously  appreciates  the 
increasing  importance  of  this  aspect  of  the  labor  market 
will  meet  successfully  either  the  counter-inducements 
of  his  competitors  or  the  growing  demands  of  the  public 
that  supports  the  cause  of  labor. 

For  it  is  goodwill  that  converts  the  " class  struggle" 
of  socialism  into  class  harmony.  It  converts  retali- 
ation into  reciprocity.  Where  it  does  not  exist, 
there  the  public,  more  and  more,  is  turning  to  another 
theory,  not  merely  the  goodwill  theory  of  labor  but 
the  public-utility  theory  of  labor. 


IV 
THE  PUBLIC 

Goodwill  is  a  matter  of  public  importance,  for  it 
builds  up  a  harmony  of  interests,  where  both  parties 
gain  reciprocal  advantage  in  comparison  with  com- 
petitors. The  courts  have  long  recognized  this  private 
advantage  as  also  a  public  advantage,  and  finally 
Congress  created  the  Federal  Trade  Commission  in 
order  to  help  eliminate  unfair  competition  in  the 
buying  and  selling  of  commodities,  and  thus  protect 
commercial  goodwill. 

But  fair  competition  does  not  eliminate  free  com- 
petition, and  free  competition  may  be  cut-throat 
competition.  There  are  always  inefficient  competitors 
and  those  who  seek  advantages  by  slashing  prices. 
Their  methods  are  not  unfair  as  long  as  they  do  not 
get  business  away  from  any  individual  competitor 
by  unfair  methods  directed  against  him  individually. 
Cut-throat  competition  is  directed  against  all  com- 
petitors and  brings  down  the  general  level  of  all 
prices  or  wages,  since  all  competitors  must  meet  it. 
Goodwill  tells  nothing  of  the  general  level.  It  tells 
only  that  one  concern  is  making  more  profit  than  its 
competitors.  Free  competition  tells  where  the  general 
level  shall  be.  Goodwill  is  an  individual  matter. 
Free  competition  affects  the  class  of  competitors 
as  a  whole. 

It  is  for  this  reason  that  labor  legislation  comes  in 

28 


THE  PUBLIC  29 

to  supplement  goodwill.  Competition  tends  to  bring 
the  advanced  employers  down  to  the  level  of  the 
backward.  It  reduces  the  general  level.  Legisla- 
tion forces  the  worst  to  come  up  toward  the  level  of 
the  more  advanced  and  eliminates  the  backward. 
It  raises  the  general  level. 

There  always  have  been  and  always  will  be  indi- 
vidual employers  in  advance  of  anything  that  legis- 
lation has  done  or  can  do.  The  first  great  employer 
of  this  kind  was  Robert  Owen,  one  hundred  years  ago, 
who  reduced  the  hours  of  labor  in  his  cotton  mills 
to  ten  per  day  and  made  a  fortune  when  others  were 
working  their  employees  fifteen  or  sixteen  hours.1 

Today,  when  legislation  in  Wisconsin,  for  example, 
sets  the  limit  of  hours  for  women  at  54  per  week,  a  few 
leading  employers  adopt  49,  and  make  more  money,  for 
they  get  and  keep  a  higher  grade  of  help.  Always 
individual  employers,  for  one  reason  or  another, 
usually  a  combination  of  good  business  and  public 
spirit,  go  ahead  of  legislation  and  set  the  example. 
Then  legislation  follows  and  attempts  to  force  others 
to  improve  conditions,  raise  wages  or  shorten  hours. 
The  progressive  ones  cannot  go  far  ahead  of  the 
general  level,  and  they  need  not.  On  the  other 
hand,  legislation  could,  with  difficulty,  get  popular 
or  legal  support  if  pioneers  had  not  already  shown  that 
it  wa  practicable  and  profitable. 

So  legislation  supplements  goodwill  and  goodwill 
pioneers  legislation.  Goodwill  is  an  individual  matter. 
Legislation  is  class  legislation.  Goodwill  raises  the 
individual  above  his  class.  Legislation  raises  the  class 

1  See  Podmore,  Robert  Owen,  A  Biography  (London,  1906),  Vol.  I 
p.  162. 


30  INDUSTRIAL  GOODWILL 

as  a  whole.  Goodwill  does  not  reach  the  entire  field. 
For  those  whom  it  does  not  reach,  who  do  not  care 
for  the  goodwill  of  labor,  or  who  are  unable,  incom- 
petent or  unprogressive,  the  state  comes  in  and  tries 
to  force  them  to  do  something  nearly  as  good  or  to 
eliminate  them  entirely. 

This  may  be  called  the  public-utility  theory  of  labor. 
If  labor  were  simply  a  private  affair  it  would  be  plainly 
unconstitutional  under  our  principles  of  government 
to  use  the  sovereign  power  to  take  something  away 
from  employers  and  hand  it  over  to  their  employees. 
The  public  power  cannot  and  should  not  be  used 
for  private  purposes.  But  if  the  welfare  of  labor  is  a 
part  of  the  public  welfare,  and  if  the  piece  of  legisla- 
tion in  question  is  suited  to  the  purpose  in  hand,  then 
those  who  stand  in  the  way  are  an  injury  to  the  public 
as  well  as  to  labor  and  may  be  restrained  in  the  public 
interest. 

To  the  anarchist  or  individualist  there  is  no  public 
purpose.  Each  individual  is  sovereign  and  has  a 
natural  right  to  do  as  he  pleases.  Private  benefit 
is  the  only  standard  of  action.  To  the  socialist  and 
syndicalist  both  the  individual  and  the  nation  are 
illusions.  There  is  simply  one  class  struggling  against 
another  class,  uncontrolled  by  any  genuine  ideas  of 
patriotism,  general  welfare,  or  public  utility.  It  is 
private  war  going  on  without  a  public  purpose. 

But  in  our  constitutional  democracy  a  private 
benefit  or  a  class  benefit  may  be  a  public  benefit, 
depending  on  circumstances  and  public  opinion.  In 
the  earlier  days  "the  public"  was  looked  upon  as 
mainly  composed  of  consumers,  whose  interest  was 
best  promoted  by  low  prices  and  low  wages  of  pro- 


THE  PUBLIC  31 

ducers.  Labor  as  such  was  not  a  part  of  the  public. 
Slave  labor  was  private  property  and  the  wages  and 
hours  of  free  labor  were  not  matters  of  public  con- 
sequence. Beginning  with  the  protective  tariff  after 
1840,  American  labor  began  to  have  national  impor- 
tance against  the  cheap  labor  of  Europe.  Public 
opinion  had  changed  so  that  when  the  new  tariffs 
came  in,  the  purpose  was  no  longer  protection  of 
capital  but  protection  of  labor.1 

There  were  political,  humanitarian  and  economic 
reasons  for  this  change  in  opinion.  Labor  began  to 
have  the  suffrage  after  the  decade  1820.  Labor 
suffered  bitterly  during  the  long  depression  following 
the  panic  of  1837.  Labor  began  to  have  purchasing 
power,  and  high  wages  for  home  labor  would  improve 
the  home  market.  Thus  American  labor  was  recog- 
nized as  a  part  of  the  American  nation  so  far  as  for- 
eign nations  were  concerned. 

But  it  required  many  years  before  labor  was  recog- 
nized as  part  of  the  public  so  far  as  American  employers 
were  concerned.  Most  of  the  legislation  protecting 
them  was  declared  unconstitutional,  as  being  class 
legislation.  While  it  was  plainly  a  public  purpose 
to  protect  labor  against  foreigners  it  was  not  such  to 
protect  them  against  their  own  employers. 

This  class  of  decisions  prevailed  until  1898  when 
the  famous  case  of  Holden  v.  Hardy  was  decided.2 
The  legislatures  of  Utah  and  Colorado  reduced  the 

1  Mangold,  George  B.,  The  Labor  Argument  in  the  American  Pro- 
tective Tariff  Discussion,  University  of  Wisconsin,  Bulletin  No.  246, 
Economics  and  Political  Science  Series,  Vol.  V,  No.  2  (1908);  Com- 
mons, Labor  and  Administration,  Chapter  XVIII,  p.  350. 

»  Holden  v.  Hardy,  169  U.  S.  366  (1898). 


32  INDUSTRIAL  GOODWILL 

hours  of  labor  in  mines  and  smelters  to  eight  per 
day.  The  Supreme  Court  of  Colorado  declared  the 
law  unconstitutional.  The  Supreme  Court  of  Utah 
declared  it  constitutional.  The  Supreme  Court  of 
the  United  States  supported  the  Utah  court.  Prior 
to  that  time  the  health  of  consumers  was,  of  course, 
recognized  as  a  public  purpose.  By  that  decision  it 
came  to  be  recognized  that  workers  also  were  a  part 
of  the  public,  and  legislation  on  behalf  of  their  health 
while  at  work  would  not  be  class  legislation  but 
reasonable  classification  for  a  public  purpose.  A  bene- 
fit to  the  workers  became  a  benefit  to  the  public. 

The  court  also  advanced  the  proposition  that 
instead  of  the  employer  and  employee  being  equal 
they  were  unequal  in  power.  Up  to  that  time  the 
court's  notion  of  equality  assumed  that  the  employer 
and  the  employee  were  equal  and  had  equal  power. 
It  had  previously  been  held  that  in  the  case  of  chil- 
dren and  women  there  was  inequality.  Children  and 
women  could  constitutionally  be  protected,  for  they 
were  weak  in  bargaining  power  and  could  not  protect 
themselves  against  the  employer.  Now  the  court 
held  that  men  also  were  weaker  than  employers  in 
bargaining  power. 

If  a  class  is  not  able  to  protect  itself  against  another 
class  and  if  there  is  a  public  purpose  involved,  then 
class  legislation  becomes  reasonable  classification.  The 
court  would  not  have  sustained  an  eight-hour  law 
applying  to  all  labor  of  all  classes,  but  it  sustained  a 
law  applying  to  labor  where  it  was  being  injured, 
under  harsh  conditions.  The  court  rendered  a  dif- 
ferent decision  in  the  baker's  case  from  New  York. 
There  the  legislature  tried  to  limit  the  hours  of  labor 


THE  PUBLIC  33 

to  10  per  day  for  bakers.  The  court  said  in  effect 
that  there  was  no  public  purpose  involved,  and  that 
there  was  no  inequality  in  bargaining  power.  The 
legislation  was  class  legislation,  for  it  attempted  to 
benefit  one  class  at  the  expense  of  another. l 

So  the  court's  opinion  has  differed  for  different 
classes  of  labor  according  to  conditions  and  according 
to  the  court's  idea  of  whether  there  is  a  public  purpose 
involved.  Labor  is  not  a  part  of  the  public  unless  it 
is  recognized  as  having  a  public  importance.  The 
state  or  nation  cannot  legislate  for  a  class  of  persons 
if  they  are  merely  private  persons  and  the  benefit 
is  merely  a  private  benefit. 

But  in  the  historical  development  of  legislation, 
people  who  have  not  been  a  part  of  the  public  finally 
become  a  part  by  being  admitted  into  citizenship 
and  granted  certain  rights  of  public  protection  by 
imposing  corresponding  duties  on  other  citizens. 
Prior  to  that  they  are  treated  as  commodities  to  be 
bought  and  sold  according  to  supply  and  demand. 
Afterward  they  are  treated  as  citizens  with  rights 
against  others  on  account  of  their  value  to  the  nation 
as  a  whole. 

What  are  the  qualities  in  a  person  which  constitute 
that  person  a  part  of  the  public?  The  first  quality  is 
health.  That  probably  is  the  most  fundamental 
public  purpose.  If  a  certain  class  is  part  of  the  public, 
then  the  health  of  that  class  is  important.  The 
health  of  that  class  becomes  a  public  utility. 

Next  come  morality  and  character.  While  our 
government  protects  property,  yet  if  property  is 
deemed  to  interfere  with  morals  our  courts  are  more 

1  Lochner  v.  New  York,  198  U.  S.  45  (1905). 


34  INDUSTRIAL  GOODWILL 

destructive  than  those  of  other  nations.  Other 
nations  perhaps  would  not  permit  prohibition  of  the 
liquor  traffic  without  compensation  to  the  distillers 
and  brewers.  In  this  country,  when  public  opinion 
gets  to  the  point  where  it  considers  a  thing  immoral, 
our  courts  refuse  to  protect  that  property  at  all  and 
the  value  of  the  property  can  be  destroyed  without 
compensation.  England,  when  she  freed  her  slaves, 
compensated  the  owners.  In  this  country  that  was 
not  done. 

Coercion  and  oppression  are  also  public  disadvan- 
tages. In  the  Holden  v.  Hardy  case  it  was  recognized 
that  inequality  o/  bargaining  power  was  a  public  dis- 
advantage, that  the  state  is  concerned  in  having  equal 
powers  among  individuals.  Where  they  are  unequal, 
if  a  public  purpose  is  served  thereby,  the  employers 
may  be  deprived,  without  compensation,  of  their 
greater  liberty,  power  and  property  rights. 

Who  is  it  that  decides  these  questions?  Who 
decides  whether  labor  is  a  public  utility  or  not? 
Who  is  it  that  decides  what  qualities  are  of  public 
importance?  In  this  country  it  is  the  voters.  We  call 
then1  decision  public  opinion.  We  say  that  public 
opinion  decides.  But  the  Supreme  Court  can  veto 
public  opinion  or  have  a  different  view  from  that  of 
the  voters  and  can  place  its  opinion  against  the 
voter's  opinion.  So  we  have  judicial  opinion  as  well 
as  public  opinion.  If  the  Supreme  Court  approves  of 
what  the  voters  decide,  it  is  constitutional.  If  it 
d  es  not  approve,  then  it  is  unconstitutional.  The 
court  can  change  its  opinion  and  it  does  change  its 
opinion,  just  as  the  voters  change  theirs. 

What  are   the   conditions   that   bring   about   this 


THE  PUBLIC  35 

change  of  opinion,  both  judicial  and  public?  First 
is  the  development  of  economic  conditions.  Health, 
morals,  welfare,  liberty,  power,  equality,  are  all 
changed  by  the  changes  brought  about  by  modern 
industry.  Second,  labor  is  a  moving  force  and  an 
important  force  in  maintaining  and  operating  this 
economic  machinery.  Formerly  it  was  not  considered 
so  important.  Now,  more  and  more,  we  see  that 
labor  is  quite  as  important  as  the  employer.  Third,  is 
the  growth  in  notions  of  ethics  and  justice.  The 
humanitarian  notions  which  began  in  the  decade  of 
the  thirties  of  the  past  century  have  changed  both 
public  and  judicial  opinion.  Fourth,  scientific 
investigation,  knowledge  of  these  conditions,  is  more 
accurate.  We  have  had  very  little  scientific  investi- 
gation of  labor  until  the  past  twenty  years.  The 
earliest  investigations  of  health  of  working  people 
were  made  about  1838-1840.  They  dealt  with  the 
effect  of  factory  conditions  on  working  women  and 
children.  Prior  to  these  investigations  public  opinion 
might  be  merely  prejudiced;  now  it  becomes  scientific 
and  informed.  There  can  be  no  substantial  or  safe 
progress  without  scientific  investigation.  There  may 
be  revolution  and  reaction,  but  not  progress. 

But  the  constitutional  method  is  based  on  ascer- 
tained facts  and  goes  ahead  and  stays.  It  is  this 
that  constitutes  "due  process  of  law."  It  is  this  that 
marks  the  decisions  of  the  court  since  the  case  of 
Holden  v.  Hardy.  Since  then,  the  economic  and 
sociological  briefs  of  Mr.  Louis  Brandeis  and  others 
have  laid  before  the  Supreme  Court  of  the  United 
States  the  opinions  and  investigations  of  medical 
people,  of  boards  of  health,  of  factory  inspectors  and 


36  INDUSTRIAL  GOODWILL 

all  classes  of  experts  on  labor's  condition.  It  is 
these  that  have  begun  to  enlighten  the  court,  and  in 
proportion  as  courts  and  other  lawyers  adapt  in  this 
way  their  legal  precedents  to  the  new  conditions  does 
the  public  purpose  of  labor  legislation  get  recognized 
and  that  which  was  class  legislation  becomes  reason- 
able protection  of  labor  in  the  interest  of  the  nation.1 

1  Commons  and  Andrews,  Principles  of  Labor  Legislation,  pp.  422- 
430. 


DEMOCRACY 

Two  extreme  ideas  of  democracy  gained  temporary 
triumph  during  the  two  great  revolutions  at  the  end 
of  the  eighteenth  and  the  beginning  of  the  twentieth 
centuries. 

The  French  Revolution  brought  in  the  anarchistic 
idea  of  democracy.  Every  individual  was  to  be  abso- 
lutely free  to  do  as  he  pleased.  Not  only  were  all 
privileges  of  nobility,  church  and  monarchy  abol- 
ished, but  all  corporations,  all  associations  or  gilds,  all 
employers'  associations  or  trade  unions,  that  tied  the 
individual  down  by  the  vote  of  his  association,  were 
prohibited.1  It  was  believed  that  individuals  were 
equal  by  nature,  and  if  so,  the  self-interest  of  each, 
if  not  interfered  with  by  government  or  by  associations 
whose  by-laws  the  government  enforced,  would 
work  out  harmoniously  for  the  good  of  all.  The 
anarchistic  idea  of  democracy  is  equal  liberty  for  every 
individual,  but  not  for  any  associations  of  individuals. 

We  know  how  this  theory  of  democracy  has  worked. 
If  allowed  to  go  on,  it  ends  in  the  despotism  of  power- 
ful individuals.  People  are  neither  equal  nor  unselfish. 
Government  has  necessarily  come  in  to  restrain  power- 
ful and  unscrupulous  individuals  and  classes,  and  pro- 

1  See  Dicey,  Law  and  Opinion  in  England,  Appendix,  Note  I,  pp. 
467-476. 

37 


38  INDUSTRIAL  GOODWILL 

tect  the  weak  and  scrupulous.  Besides,  individuals 
seldom  act  as  individuals.  They  act  as  associations. 

The  Russian  Revolution,  on  the  other  hand,  culmi- 
nated in  the  socialistic  idea  of  democracy.  Labor 
produces  all  wealth  and  is  entitled  to  the  whole  product. 
But  the  individual  laborer  is  powerless  to  get  that 
product.  So,  organized  labor  takes  possession  of  the 
factories.  The  owners  are  disfranchised  and  the  labor 
unions  operate  both  the  government  and  the  industries.1 
The  socialistic  idea  of  democracy  means  the  dictator- 
ship of  organized  labor. 

We  have  seen  how  this  theory  works.  The  sovyets 
could  not  get  business  ability  or  managing  ability  to 
come  in  and  direct  their  factories  because  they  had 
wiped  out  profits;  and  they  could  not  get  new  capital 
to  come  in  because  they  had  ruined  credit. 

The  anarchistic  idea  of  democracy  is  based  on  the 
hope  that  individuals  will  voluntarily  be  brothers 
and  live  in  harmony  if  they  are  not  coerced  by  laws 
that  enforce  the  rights  of  property.  The  socialistic 
idea  of  democracy  is  based  on  the  hope  that  class  strug- 
gle will  stop  when  the  only  class  that  governs  is  the 
labor  class. 

But  even  brothers  do  not  always  live  in  harmony, 
and  class  struggle  never  will  stop.  As  long  as  nature's 
resources  are  limited  in  supply,  as  long  as  labor,  science, 
capital,  and  management  are  needed  to  increase  the 
supply  of  products,  as  long  as  the  demand  for  food, 
clothing,  shelter  and  other  services  is  greater  than 
the  supply,  so  long  will  there  be  disharmony  and 
opposition  of  interests.  At  one  end  is  consumption  of 
wealth  which  always  wants  more  of  it.  At  the  other 

1  See  Ross,  Russia  in  Upheaval,  p.  208  ff. 


DEMOCRACY  39 

end  is  production  of  wealth  which  always  means  sacrifice 
and  effort.  As  long  as  resources  are  limited  and  wants 
unlimited  there  will  be  struggle  between  individuals 
and  classes. 

The  struggle  is  permanent  and  irrepressible,  but 
may  be,  and  is,  reconciled  more  or  less  as  we  go  along. 
We  cannot  wait  for  the  millenium  either  of  anarchism 
or  socialism,  for  it  assumes  both  perfectibility  of 
human  nature  and  unlimited  supply  of  products. 
That  means  the  life  beyond.  The  war  has  forced  us 
to  adopt  ideas  of  democracy  suited  to  this  imperfect 
world. 

After  Congress  and  the  President  had  authorized 
Mr.  Hoover  to  fix  the  price  of  wheat,  he  looked  around 
for  somebody  who  could  represent  the  producers  of 
wheat  and  somebody  who  could  represent  the  con- 
sumers of  flour.  He  found  certain  farmer's  organiza- 
tions that  could  be  said  to  speak  for  the  farmers. 
He  found  that  the  body  that  came  nearest  to  represent- 
ing the  consumers  was  the  American  Federation  of 
Labor.  He  asked  these  organizations  to  appoint 
representatives  to  assist  him,  which  they  did.  He 
had  also  his  own  experts  and  statisticians.  The 
farmers  wanted  $2.50  per  bushel.  The  laborers 
thought  $1.84  was  enough.  Mr.  Hoover  wanted 
the  wheat  in  large  quantities.  After  several  days 
they  compromised  on  $2.20. 

This  was  representative  democracy  in  industry. 
It  was  class  struggle  reconciled  in  the  public  interest. 
Mr.  Hoover  did  not  fix  the  price  of  wheat.  Presi- 
dent Wilson  did  not  fix  the  price.  It  was  fixed  by 
organized  labor  and  organized  agriculture.  After- 
ward an  effort  was  made  in  Congress  to  go  over  this 


40  INDUSTRIAL  GOODWILL 

price  ard  place  it  at  $2.50  in  the  alleged  interest  of 
the  farmers.  It  would  have  been  just  as  reasonable 
for  the  laborers  to  have  violated  the  compromise 
and  for  Congress  to  have  put  the  price  at  $1.84  in 
the  alleged  interest  of  the  laborers. 

Congress  does  not  directly  represent  either  farmers 
or  consumers.  It  may  be  political  democracy,  but 
it  is  not  industrial  democracy.  Representative  de- 
mocracy in  industry  is  representation  of  organized 
interests.1  Individuals  who  are  not  organized  cannot 
choose  representatives.  They  must  content  them- 
selves with  their  tacit  proxies  given  to  the  organized. 
When  once  organized  they  can  be  consulted  in  advance 
of  action.  The  procedure  of  autocracy  is  to  act  first 
and  consult  afterwards.  The  procedure  of  democracy 
is  to  consult  first  and  act  afterwards. 

But  democracy  cannot  quickly  consult  all  individ- 
uals whose  interests  are  affected.  It  comes  as  near 
as  possible  to  doing  it  when  it  consults  those  who  have 
been  freely  chosen  for  the  purpose  without  inter- 
ference from  other  classes,  so  that  they  really  repre- 
sent the  individuals  of  the  class  affected.  No  man 
who  is  "  disinterested "  can  represent  opposing  inter- 
ests. But  when  the  interested  man  is  consulted, 
then  the  interests  that  select  him  are  substantially 
consulted.  When  he  agrees,  then  those  with  similar 
interests  have  agreed. 

For  Congress  to  have  fixed  the  price  of  wheat  at 
$2.50  would  have  been  as  autocratic  as  for  an  oli- 
garchy of  farmers  to  have  fixed  it  at  that  price. 
For  Congress  to  have  fixed  it  at  $1.84  would  have  been 

1  See  Commons,  Labor  and  Administration,  p.  55  f;  Proportional 
Representation,  pp.  355-363. 


DEMOCRACY  41 

to  submit  to  the  ''dictatorship  of  the  proletariat.'1 
For  Mr.  Hoover  and  his  staff  to  have  fixed  the  price 
would  have  been  government  by  "bureaucracy." 
For  the  organized  interests  to  fix  it  themselves  under 
expert  advice  of  the  nation's  food  administrator  and 
his  statisticians  was  the  practical  democratic  way  of 
doing  it.  It  was  the  procedure  of  appealing  to  the 
harmony  of  interest  of  both  classes  for  the  public  good. 

Again,  the  attempt  was  made  for  nearly  a  year  to 
bring  together  employers  and  employees  for  produc- 
tion of  munitions  of  war,  under  the  direction  of  a 
trade  unionist  as  Secretary  of  Labor.  Notwith- 
standing his  great  ability  and  unquestioned  fairness  it 
was  impossible  to  secure  the  cooperation  of  employers. 
He  represented  but  one  of  the  opposing  interests, 
and  his  staff  lacked  the  business  experience  and  record 
of  impartiality  needed  to  obtain  their  confidence. 
Finally,  the  President  directed  the  Secretary  of  Labor 
to  select  as  his  advisers  representative  employers  and 
employees.  He  went  to  the  one  great  organization 
of  employers,  the  National  Industrial  Conference 
Board,  and  to  the  great  organization  of  employees,  the 
American  Federation  of  Labor.  Each  side  appointed 
five  representatives  and  they  in  turn  each  selected  the 
most  representative  professional  men  in  the  country, 
ex-President  Taft,  to  lead  the  employers,  and  Frank 
P.  Walsh  to  lead  the  workingmen. 

Forthwith  this  representative  body  formulated  a 
national  labor  program,  which  the  Secretary  adopted, 
"to  maintain  maximum  production  by  settling  obstruct- 
ive controversies  between  employers  and  workers."3 

Somewhat  similar  arrangements  were  made  to  cover 

1  Official  Bulletin,  April  1,  1918,  p.  7. 


42  INDUSTRIAL  GOODWILL 

all  of  the  vital  activities  of  the  Department,  including 
employment  offices,  housing,  etc.  With  this  staff 
of  investigators,  adjusters,  and  executives,  having 
the  confidence  of  all  parties,  a  further  step  in  advance 
was  made  in  bringing  about  the  union  of  efficiency 
and  democracy.1 

Other  departments  of  war  administration  illustrate 
the  same  principle.  The  Fuel  Administration  had  its 
leading  coal  operators  and  the  President  of  the  United 
Mine  Workers  of  America.  The  Shipping  Board, 
the  War  Industries  Board,  and  others,  to  a  greater  or 
less  degree,  formally  or  informally,  followed  the  same 
procedure. 

So,  in  the  stress  of  national  peril  American  democ- 
racy called  to  its  aid,  not  only  distinguished  indi- 
viduals, but  the  organized  opposing  class  interests 
of  the  nation.  The  organizations  themselves  were 
incorporated  in  the  framework  of  government.  No 
longer  were  they  merely  private  associations  carrying 
on  private  contests,  distrusted  and  even  outlawed, 
but  they  were  raised  to  the  level  of  recognized  public 
importance.  Organized  labor,  organized  farmers, 
organized  capitalists  became  public  utilities. 

Democracy  takes  on  a  new  meaning,  the  partner- 
ship of  classes.  Like  any  partnership  they  have  their 
disputes.  In  times  of  peace  or  in  non-essential 
industries,  these  may  be  matters  of  public  indifference. 
They  are  private  affairs.  In  time  of  national  peril, 
or  in  strategic  industries,  they  are  vital  to  national 

1  Official  Bulletin,  January  16,  1918,  p.  8;  April  1,  1918,  p.  1;  May 
14,  1918,  p.  1;  Wehle,  Louis  B.,  "Labor  Problems  in  the  United  States 
During  the  War,"  Quarterly  Journal  of  Economics,  February,  1918; 
Marshall,  L.  C.,  "The  War  Labor  Program  and  Its  Administration," 
Journal  of  Political  Economy,  May,  1918. 


DEMOCRACY  43 

security  or  prosperity.  The  organizations  themselves 
perform  public  functions.  The  nation  cannot  live 
without  enlisting  them. 

Over  and  above  the  individuals  composing  them, 
they  become  a  more  embracing  public  utility.  Only 
through  organization  can  the  modern  industrial 
worker,  whether  capitalist  or  laborer,  have  an  effect- 
ive voice  either  in  industry  or  government.  His 
liberty  is  bound  to  be  limited  anyhow  by  the  liberties 
and  powers  of  opponents  or  competitors.  In  his 
individual  weakness  he  gains  greater  power  and  liberty 
through  organization.  And  representative  democ- 
racy is  neither  the  imagined  anarchistic  equality  of 
individuals  nor  the  socialistic  dictatorship  of  labor, 
but  it  is  the  equilibrium  of  capital  and  labor — the  class 
partnership  of  organized  capital  and  organized  labor, 
in  the  public  interest. 

The  thing  may  not  be  always  easy  in  practice.  It 
may  not  always  work  smoothly.  Strikes  and  struggles 
may  come.  But  "the  public"  cannot  listen  to  any 
proposal  to  suppress  either  kind  of  organization. 
If  one  is  suppressed  then  the  other  becomes  dictator. 
The  equilibrium  of  democracy  may  not  be  easy  to 
work  out,  but  what  else  is  there  to  do?  Even  if 
suppression  is  attempted  it  cannot  for  long  succeed. 
The  first  national  crisis  sets  the  suppressor  aside. 
President  Wilson,  who  in  times  past  had  criticized 
restrictive  practices  of  unions,  yet,  when  the  crisis 
came,  attended  the  national  convention  of  organized 
labor  and  pledged  the  nation's  support  to  their  proper 
demands.1 

1  War,  Labor  and  Peace,  Number  9,  Red,  White  and  Blue  Series, 
Issued  by  the  Committee  on  Public  Information,  p.  7.  An  address 
before  the  Convention  of  the  American  Federation  of  Labor,  held  in 
Buffalo,  New  York. 


44  INDUSTRIAL  GOODWILL 

And  ex-President  Taft,  whose  judicial  decisions  had 
set  up  standards  of  government  injunctions  obstructive 
to  unionism,  when  he  became  responsible  for  the  labor 
policy  of  the  war,  notified  the  Western  Union  Tele- 
graph Company  that  the  truce  between  capital  and 
labor  did  not  include  the  maintenance  of  the  "  closed 
non-union  shop."1  In  the  national  peril,  the  policy 
of  both  the  President  and  the  ex-President  goes  beyond 
their  earlier  opinions  as  professor  or  judge,  and  throws 
the  weight  of  the  nation  on  the  side  of  encouraging 
unions  to  go  out  and  organize  the  unorganized. 
Organization  is  bound  to  come,  in  one  form  or  another, 
under  the  stress  of  economic  conditions.  Rather 
than  leave  it  to  the  anarchistic  or  socialistic  unions 
that  propose  both  to  take  over  the  employer's  property 
and  to  break  down  the  patriotism  of  labor,  they 
place  the  nation's  trust  in  the  unions  which  through 
their  representatives  had  agreed  with  the  employers 
to  support  the  industries  of  the  nation.  Such  a 
union  serves  indeed  a  public  purpose,  and  no  one  is  in 
a  better  position  to  know  it  than  he  upon  whom,  like 
President  Wilson  or  ex-President  Taft,  is  laid  the  chief 
responsibility  of  carrying  the  nation  through  its  crisis. 

At  the  very  time  when  these  momentous  decisions 
were  being  made  by  executive  departments  of  govern- 
ment, the  judicial  department  handed  down  a  majority 
decision  holding,  in  effect,  that  a  union  is  a  mere  pri- 
vate affair  and  therefore  has  no  right,  against  the 
employer's  wish,  to  go  among  his  employees  and  even 
persuade  them  to  join  the  union.2  The  corporation, 

1  Official  Bulletin,  June  4,  1918,  p.  6. 

8  Hitchman  Coal  and  Coke  Company  v.  John  Mitchell  et  al,  245 
U.  S.  229  (1917). 


DEMOCRACY  45 

said  the  majority  of  the  court,  "is  entitled  to  the 
goodwill  of  its  employees,  precisely  as  a  merchant  is 
entitled  to  the  goodwill  of  his  customers,  although 
they  are  under  no  obligation  to  continue  to  deal  with 
him." 

Prior  to  this  decision  the  similar  cases  went  off  on 
the  allegation  of  coercion  or  intimidation.  In  this 
case  the  decision  went  to  the  final  limit  of  prohibiting 
even  persuasion  by  the  agents  of  a  labor  union.  Even 
the  "goodwill"  theory  was  distorted,  for  goodwill  is 
competitive  persuasion,  and  this  the  court  attempts 
to  prohibit,  if  the  competitor  is  a  labor  union. 

Two  opposing  rights  were  in  conflict,  the  right  of 
the  corporation  and  the  right  of  the  trade  union. 
If  both  are  merely  private  associations  then  the  right 
of  the  corporation  prevails.  It  had  cemented  its 
rights  by  oral  contracts  with  its  workmen  in  which 
they  agreed  to  work  as  non-union  men.  If  there  is 
no  public  purpose  opposed  to  such  contracts,  then 
even  persuasion  by  labor  organizations  is  an  illegal 
conspiracy. 

The  dissenting  opinion  of  the  minority  of  the  court 
maintained  that  the  efforts  of  the  union  to  persuade 
employees  were  not  illegal  since  the  contracts  with 
their  employers  were  not  like  other  contracts  but  were 
terminable  at  will.  Neither  was  the  "closed  union 
shop"  policy  of  the  union  coercive  any  more  than  the 
"closed  non-union  shop"  policy  of  the  corporation. 
Both  policies  being  therefore  persuasive  and  not 
coercive,  the  persuasion  offered  to  join  the  union  was 
legal,  provided  the  purpose  of  the  union  was  justifiable. 
That  purpose  was  "confessedly  in  order  to  strengthen 
the  union,  in  the  belief  that  thereby  the  condition  of 


46  INDUSTRIAL  GOODWILL 

workmen  engaged  in  mining  would  be  improved; 
the  bargaining  power  of  the  individual  workingman 
was  to  be  strengthened  by  collective  bargaining."1 

Is  such  a  purpose  legal  or  illegal?  The  majority 
held  that  it  was  illegal  when  it  interfered  with  the 
employer's  goodwill  and  labor  contracts.  The  minor- 
ity held  that  it  was  legal.  "It  should  not,"  said  the 
minority  opinion,  "at  this  day  be  doubted  that  to 
induce  workingmen  to  leave  or  not  to  enter  an 
employment  in  order  to  advance  such  a  purpose,  is 
justifiable  when  the  workmen  are  not  bound  by  con- 
tract to  remain  in  such  employment." 

Thus,  in  the  final  analysis,  the  legality  or  illegality 
of  a  labor  union  turns  on  the  opinion  of  the  judge  or 
the  executive  or  the  public  as  to  the  public  purpose 
of  the  union.  If  it  exists  only  for  a  private  purpose, 
then  even  its  persuasive  efforts  are  illegal.  If  it 
performs  a  public  purpose,  then  its  effort  to  strengthen 
its  bargaining  power  by  persuasion  is  lawful.  All 
other  details  and  all  technical  reasoning  of  the  law  are 
subordinate  to  this. 

Does  it,  or  does  it  not,  serve  a  public  purpose? 
Each  person  must  decide  for  himself.  When  he 
decides,  we  know  his  definition  of  democracy.  If 
the  union  performs  no  public  purpose  then  democracy 
is  the  anarchistic,  socialistic  or  capitalistic  definition 
of  democracy,  and  only  those  who  have  the  power  may 
govern  if  they  wish.  But  if  both  associations  of 
workmen  and  associations  of  employers  perform  a 
public  service,  then  neither  can  be  left  to  dominate 

1  Hitchman  Coal  and  Coke  Company  v.  John  Mitchell  et  al,  245 
U.  8.  229,  273  (1917), 


DEMOCRACY  47 

the  other,  but  both  unite  in  a  representative  democ- 
racy as  the  means  of  promoting  the  public  welfare. 

For,  the  struggle  of  capital  and  labor  is  almost  never 
a  struggle  of  individuals.  It  always  involves  associa- 
tions of  individuals.  The  court  starts  with  a  fiction 
that  a  corporation  is  a  " person"  and  then  holds  that 
an  individual  worker  and  an  individual  corporation 
are  exactly  equal,  in  that  the  right  of  one  person  to 
quit  work  is  exactly  equal  to  the  right  of  the  other 
person  to  discharge  him.  It  thereupon  declares 
unconstitutional  all  the  laws  in  which  the  legislature 
tries  to  protect,  against  employers,  the  worker's 
right  to  belong  to  a  union,  by  prohibiting  employers 
from  discharging  them  solely  on  account  of  union 
membership.1 

These  decisions  are  absurd  enough  in  the  case  of  a 
corporation,  which  is  obviously  an  association  of 
capitalists.  The  right  of  a  worker  to  quit  working  for 
an  association  of  capitalists  is  by  no  means  equal  to 
the  right  of  the  association  of  capitalists  to  discharge 
him. 

The  legal  decisions  are  equally  absurd  in  the  case  of 
a  so-called  " individual"  employer.  Every  employer, 
whether  incorporated  or  not,  is  an  association  of 
capitalists,  for  he  is  an  association  of  all  the  bankers, 
investors,  creditors,  material  men,  who  have  trusted 
their  capital  to  him.  He  speaks  as  one  man  for  his 
association  of  capitalists. 

And  the  courts  have  worked  out,  on  behalf  of 
associated  capital,  an  elaborate  and  highly  perfected 
law  of  "  principal  and  agent."  When  a  foreman, 

1  Adair  v.  U.  S.  208  U.  S.  161  (1908);  Coppage  v.  Kansas  236  U.  S. 
1  (1915);  Cf.  Freund,  Standards  of  American  Legislation,  pp.  225-248. 


48  INDUSTRIAL  GOODWILL 

or  superintendent,  or  manager,  fires  an  employee 
or  threatens  to  fire  him,  or  refuses  to  deal  with  him, 
he  is  the  agent  who  concentrates  on  that  man  the 
combined  power  of  all  the  capitalists,  investors, 
and  creditors  connected  with  the  business.  The  claim 
of  laborers  to  have  the  right  to  organize  is  simply  their 
claim  to  come  under  this  law  of  principal  and  agent. 
The  right  of  labor  to  organize  is  but  the  right  of 
laborers  to  speak  as  one  man  through  one  agent 
for  their  association  of  laborers.  The  employer 
always  speaks  as  a  representative  of  associated  capital. 
Unless  the  laborer  can  speak  as  a  representative  of 
associated  laborers,  he  cannot  speak  with  equal  power. 
Neither  the  nation  nor  the  laborers  can  remain 
content  until  the  Supreme  Court  reverses  these 
decisions1  and  falls  in  line  with  effective  democracy. 
For,  effective  democracy  is  representative  democracy. 

1  Adair  v.  U.  S.  208  U.  S.  161  (1908);  Coppage  v.  Kansas  236  U.  S. 
1  (1915);  Hitchman  Coal  and  Coke  Company  v.  John  Mitchell  et  al., 
245  U.  S.  229  (1917). 


VI 
SOLIDARITY 

Under  the  workmen's  compensation  law,  a  case  in 
dispute  came  before  the  Industrial  Commission  of 
Wisconsin  for  decision.  A  teamster  got  drunk  on 
his  employer's  time,  fell  off  his  wagon  and  was  killed. 
His  widow  petitioned  for  the  award  of  indemnity 
to  be  paid  by  the  employer.  The  law  provided  that 
no  compensation  should  be  paid  in  cases  of  "  willful 
misconduct." 

Evidently,  from  one  point  of  view,  it  was  his  own 
willful  misconduct  that  caused  the  teamster's  death. 
He  had  even  driven  out  of  his  way  and  taken  an  hour 
of  his  employer's  time  to  go  to  the  saloon  and  buy 
the  whiskey  that  killed  him.  From  the  standpoint 
of  individual  responsibility  for  that  particular  accident, 
the  worker  alone  was  responsible  and  it  would  be  a 
flagrant  injustice  to  require  the  employer  to  pay  $2000 
to  the  widow  and  orphans  on  account  of  an  accident 
for  which  the  employer  was  not  responsible.  So 
reasoned  the  employer  and  such  were  the  precepts 
of  the  common  law  which  make  each  individual 
responsible  for  his  own  acts  and  not  for  the  acts  of  other 
persons. 

But  the  workmen's  compensation  law  had  abolished 
the  employer's  defense  of  contributory  negligence, 
except  where  the  contributory  negligence  was  the 
"willful  misconduct"  of  the  employee.  The  Com- 

4  49 


50  INDUSTRIAL  GOODWILL 

mission  had  to  decide  whether  drunkenness  was 
willful  misconduct.  If  it  was,  then  the  widow 
and  orphans  had  to  suffer  the  cost  of  the  accident. 
If  it  was  not,  then  the  employer  had  to  pay  them  about 
$2000  toward  tiding  them  over  the  period  of  poverty 
and  infancy. 

The  Commission,  after  much  hesitation,  decided 
in  favor  of  the  widow  and  orphans.  It  was  not  will- 
ful misconduct.  The  drunken  man  did  not  intend 
to  kill  himself.  They  decided  that  by  "willful 
misconduct"  was  meant  an  injury  intentionally 
self-inflicted. 

The  Commission,  perhaps,  weighed  the  conse- 
quences of  willful  misconduct  rather  than  the  accepted 
meaning  of  the  term.  Somebody  must  pay  the  cost 
of  accidents.  Shall  it  be  the  widows  and  orphans 
themselves?  Shall  it  be  the  tax-payers  and  the 
charities?  Shall  it  be  the  individual  employer?  Shall 
it  be  the  industry  as  a  whole  ?  Somebody  must  decide. 
Formerly  the  widows  and  orphans  paid  when  the 
breadwinner  was  at  fault;  then  the  charities;  then  the 
tax-payers.  The  Commission  figured  that  the  law- 
makers intended  that  the  industry  should  pay  the 
first  cost  of  accidents.  The  Supreme  Court  sustained 
the  decision.1  Afterward  similar  cases  arose.  A 
sailor  fell  overboard  while  drunk  and  the  employer 
was  required  to  pay  compensation  to  his  widow  and 
orphans  On  the  former  legal  theory  of  individual 
responsibility  these  decisions  could  not  be  justified. 

1  Nekoosa-Edwards  Paper  Co.  v.  Mittie  Smith,  154  Wis.  105  (1913). 
The  legislature  afterward  sustained  the  opinion  and  made  the  law 
explicit  by  substituting  "intentionally  self-inflicted"  for  "willful 
misconduct." 


SOLIDARITY  51 

Only  on  a  theory  of  partnership  or  solidarity  of 
interest  can  they  find  justification. 

Employer  and  employee  are  engaged  in  a  common 
enterprise.  They  jointly  assume  the  risks  and  share 
the  burdens  and  benefits  of  the  enterprise. 

More  than  that.  They  share  each  other's  frail- 
ties. The  employer  takes  the  workman  as  he  is, 
and  the  workman  takes  the  employer  as  he  is.  The 
employer  gains  in  some  cases  and  loses  in  other  cases, 
and  the  law  attempts  to  balance  one  off  against 
the  other.  The  employer  gains  in  those  cases  where 
he  alone  is  responsible,  for,  instead  of  heavy  damages 
of  many  thousand  dollars  where  a  man  is  badly 
disabled  through  the  employer's  fault,  he  pays 
only  a  moderate  compensation  previously  set  forth 
in  the  statute.  The  employer  loses  where  the  worker 
is  responsible,  for  he  pays  the  same  compensation 
as  when  he  himself  is  responsible. 

The  law  attempts  to  set  off  the  frailties  of  one  against 
the  frailties  of  the  other,  and  to  balance  off  the  chances 
of  human  nature  with  its  imperfections  as  they  are. 
Each  takes  the  other  as  he  is,  with  all  his  frailties. 

Each  also  takes  the  occupation  as  it  exists,  with 
all  its  risks.  They  engage  jointly  in  a  common  enter- 
prise. The  risks  of  the  enterprise  and  the  risks  of 
each  other  are  shared  by  each  according  to  a  schedule 
of  prices  set  forth  in  advance.  If  the  sailor  did  not 
go  to  sea  he  would  not  drown  even  if  drunk,  nor 
even  if  his  employer  were  criminally  careless.  If 
the  employer  did  not  own  vessels  and  hire  sailors  to 
operate  them  he  would  not  run  the  risk  of  drowning 
drunk  sailors,  It  requires  the  risks  of  the  business, 


52  INDUSTRIAL  GOODWILL 

the  risks  of  human  nature  and  the  partnership  of 
capital  and  labor  to  produce  industrial  accidents. 

Partnership  is  an  economic  fact.  It  may  or  may  not 
be  recognized.  But  if  it  is  a  fact  it  will  ultimately  force 
us  to  recognize  it  and  give  it  a  place  in  our  theories. 
It  is  a  fact  forced  upon  us  by  the  way  in  which  business 
is  carried  on,  and  by  the  alternatives  that  would  hap- 
pen if  we  did  not  accept  it.  Without  even  knowing 
what  we  do  we  are  compelled  to  act  sometimes 
according  to  those  consequences.  The  theory  comes 
afterward  and  helps  us  to  explain  our  own  acts. 
The  Industrial  Commission,  as  practical  men,  acted 
perhaps  in  view  of  consequences  and  their  idea  of  the 
purpose  of  the  law.  Eventually  the  theory  of 
solidarity  is  formulated  and  serves  to  justify  similar 
acts. 

The  employer  who  has  not  yet  accepted  the  theory 
of  solidarity  has  a  wrong  attitude  toward  the  law. 
He  contests  the  cases  where  he  is  not  at  fault.  He  is 
litigious  and  incensed  at  the  injustice  of  paying  dam- 
ages due  to  the  frailties  of  others.  He  cultivates 
ill-will. 

Probably  10  per  cent  of  accidents  are  owing  to 
infection  of  trivial  wounds.  Infection  would  not 
follow  an  accident  if  the  worker  had  resorted  to  the 
employer's  " first  aid."  Infection  is  due  to  the  work- 
er's misconduct.  Yet  the  employer  takes  the  worker 
as  he  is  and  pays  the  damages  of  infection.  Hernia, 
epilepsy,  and  other  frailties,  are  often  inherited 
predispositions.  Without  inherited  or  acquired  weak- 
nesses many  of  the  accidents  in  industry  would  not 
occur.  Yet  the  industry  pays  the  cost  of  the  worker's 
defects  just  as  it  pays  the  costs  of  defects  in  machinery. 


SOLIDARITY  53 

What  are  the  consequences  of  accepting  the  theory 
of  solidarity? 

A  safety  engineer  showed  his  general  manager  that 
the  time  lost  on  account  of  accidents  would  have 
turned  out  35  more  automobiles  that  year.  Safety 
work  had  been  classed  as  unproductive  labor.  What 
the  worker  suffers  from  accidents  is  self-evident. 
What  the  employer  suffered  was  not  so  plain.  Acci- 
dent prevention  had  been  considered  humanitarian. 
When  it  came  to  be  seen  that  it  produced  profits  as 
well  as  safety,  then  it  entered  the  field  of  good  business. 
For  goodwill  benefits  both  parties,  and  safety  work  is 
productive,  for  it  builds  up  the  goodwill  of  labor. 

Because  good  business  did  not  reach  all  employers, 
the  several  states  began  to  supplement  it  by  legislation. 
The  public  interest  in  accidents  has  arisen  through 
new  conditions  and  motives,  well  known,  such  as 
the  new  dangers  of  modern  machinery  and  trans- 
portation, the  fire  hazard  where  labor  is  massed  in 
factories,  the  recognition  that  labor  is  a  part  of  the  pub- 
lic, and  the  labor  vote. 

Legislation  at  first  was  repressive.  The  employer 
was  treated  as  a  criminal.  New  misdemeanors  were 
created  by  law.  Employers  were  ordered  to  safe- 
guard machinery.  The  state  appointed  special  police, 
the  factory  inspectors,  to  go  about  and  discover  if 
employers  had  obeyed  the  law  by  installing  the  safe- 
guards. Evidence  was  collected  and  prosecution  was 
started  in  court.  The  court  presumes  every  man  to 
be  innocent  unless  proven  guilty  and  gives  him  the 
benefit  of  every  doubt.  If  the  legislature  failed 
to  specify  a  certain  point  of  danger,  then  there  was  no 
misdemeanor  in  leaving  it  dangerous.  Thus  the 


54  INDUSTRIAL  GOODWILL 

criminal  theory  of  individual  responsibility  broke 
down. 

But  there  was  also  the  common-law  theory  of 
responsibility  for  injury.  Every  person  must  enjoy 
his  own  property  in  such  a  way  as  not  to  injure  others. 
If,  by  his  own  acts,  he  invades  the  rights  of  others, 
he  is  liable  in  a  suit  for  damages.  But  he  is  not 
responsible  for  the  acts  of  third  parties.  So,  in  a 
suit  for  damages  by  an  injured  employee,  the  law 
allowed  the  employer  to  set  up  the  defense  that  he 
was  not  responsible,  by  showing  that  someone  else 
was  responsible  or  had  assumed  responsibility.  Per- 
haps the  employee  himself  was  careless,  or  he  had 
assumed  the  risks  of  the  occupation  by  the  act  of 
accepting  the  job,  or  a  fellow-servant  was  responsible 
and  should  have  been  the  one  sued  for  damages. 
The  common-law  theory  of  individual  responsibility 
broke  down. 

Meanwhile  there  had  been  growing  up  voluntarily 
a  theory  of  group  responsibility.  Employers  insured 
each  other  against  the  risks  of  accidents  by  paying 
premiums  into  a  common  fund  which  then  could  be 
drawn  upon  to  meet  the  individual  obligation  of  any 
subscriber  in  case  of  accident.  Voluntarily  employers 
assumed  jointly  each  other's  risks  by  taking  out 
insurance  with  casualty  companies.  Voluntarily  they 
acted  on  a  theory  of  group  responsibility. 

But  they  insured  themselves  against  the  wrong 
thing.  They  insured  themselves  against  the  legal 
risk  of  a  law  suit  and  not  against  the  industrial  risk 
of  injury  to  the  worker.  Further,  they  introduced  a 
third  party,  the  insurance  company,  between  them- 
selves and  their  workers.  They  agreed  not  to  nego- 


SOLIDARITY  55 

tiate  with  their  own  employees  in  case  of  accident 
compensation,  but  to  abandon  the  worker  to  a  third 
party  at  the  very  moment  when  they  ought  to  have 
devoted  themselves  most  sympathetically  to  his  wel- 
fare. Under  such  a  system  goodwill  was  impossible. 

This  impossible  situation  could  be  remedied  only  by 
compulsory  compensation  and  compulsory  insurance. 

The  common-law  doctrine  of  individual  responsibility 
was  therefore  revised,  and  the  employer  was  made 
responsible  for  all  accidents,  whether  they  happened  by 
his  own  fault,  or  the  fault  of  a  fellow-servant,  or  the 
contributory  fault  of  the  injured  workman  himself, 
or  by  nobody's  fault. 

Naturally,  at  first,  the  courts  were  inclined  to 
look  upon  such  a  revolutionary  law  as  unconstitutional. 
It  deprived  the  employer  of  rights  of  property  by 
compelling  him  to  pay  damages  when  he  was  not 
responsible  for  injury.  The  Supreme  Court  of  New 
York  declared  that  the  workman's  compensation  law 
was  unconstitutional,  because  that  court  held  to  the 
theory  of  individual  responsibility.  The  statute  de- 
prived the  employer  of  his  property  without  due 
process  of  law,  because  it  made  him  pay  damages  in 
cases  where  he  was  not  at  fault.1  Afterward  the 
constitution  of  the  state  was  amended  and  the  court 
then  accepted  the  notion  of  solidarity. 

The  Supreme  Court  of  the  state  of  Washington 
took  the  opposite  view.  Employers  as  a  class  are 
made  responsible  for  accidents  to  laborers  as  a  class 
and  can  be  required  to  contribute  to  a  common 
insurance  fund,  so  that  the  employer  who  has  no 
accidents  pays  for  the  accidents  in  the  shops  of  his 

1  Ivea  v.  South  Buffalo  R.  Co.  201  N.  Y.  271  (1911). 


56  INDUSTRIAL  GOODWILL 

competitors.1  Partnership  of  capital  and  labor, 
solidarity  of  individuals  within  a  class,  group  responsi- 
bility of  employers,  becomes  a  theory  of  jurispru- 
dence to  a  limited  extent,  in  place  of  the  theory  of 
individual  responsibility.2 

Statistics  showed  that  accidents  accompany  indus- 
try as  a  whole,  at  different  rates  in  different  indus- 
tries. The  individual  disappears  in  the  statistical 
average.  These  accidents  are  a  cost  of  production 
which  must  be  met,  like  the  breakage  of  machinery. 
Industry  as  a  whole  must  bear  the  expense.  Insofar 
as  the  expense  is  laid  upon  the  laborer  it  can  go  no 
further.  The  common-law  theory  of  demand  and 
supply  assumed  that  the  laborer  could  shift  the  cost 
of  the  risks  of  the  occupation  upon  the  employer  by 
demanding  and  getting  higher  wages.  This  was  doubt- 
ful. At  any  rate,  the  individual  laborer  who  met 
with  the  accident  could  not  shift  the  cost  of  that 
particular  accident.  He  is  the  ultimate  producer 
and  must  endure  the  ultimate  cost.  But  insofar  as 
the  cost  can  be  laid  upon  the  employer  he  is  in  a 
position  to  shift  it  to  the  ultimate  consumer,  by  charg- 
ing higher  prices  for  the  product.  He  is  the  worker's 
partner,  agent  and  representative,  selling  the  worker's 
product  to  the  public.  If  the  public  is  willing  to  share 
a  part  of  the  laborer's  cost  of  accidents  then  the 
employer  is  the  middleman  to  collect  the  bill  and  pay 
it  back  to  the  laborer. 

Provided,  however,  that  all  employers  are  com- 
pelled to  bear  the  same  expense.  If  the  indifferent, 

1  David  Smith  Co.  v.  Clausen,  65  Wash.  156  (1911). 
1  Cf .  Freund,  Standards  of  American  Legislation,  pp.  109-112;  Gide 
and  Rist,  A  History  of  Economic  Doctrines,  pp.  606,  607. 


SOLIDARITY  17 

or  incompetent,  or  inhuman  employer  can  escape  the 
expense,  then  his  cut-throat  competition  prevents 
the  others  from  shifting  it  by  charging  higher  prices. 
The  class  responsibility  of  employers  is  the  responsi- 
bility that  the  poorest  or  worst  employer  owes  to  the 
better  employer  not  to  force  him  down  by  competi- 
tion to  his  lower  level.  Where  he  does  not  willingly 
meet  this  responsibility,  legislation  compels  him  to 
do  it. 

Compulsory  compensation  for  accidents  compels 
the  careless,  thoughtless,  and  inhuman  employer  to 
perform  the  same  service  for  labor  that  the  careful, 
competent  or  humane  is  already  doing  or  wants  to 
do.  It  raises  the  level  of  competition  at  that  point, 
eliminates  cut-throat  competition,  enforces  the  duty 
of  fair  competition,  and  shifts  the  cost  to  the  consumer. 

Compulsory  insurance  is  the  opposite  of  compulsory 
compensation.  It  compels  the  careful,  competent, 
or  humane  employer  to  help  pay  for  the  accidents 
occurring  in  the  shops  of  his  careless  competitors. 
When  this  is  done  voluntarily  by  an  insurance 
contract,  the  employer's  property,  of  course,  is  not 
taken  except  with  his  previous  approval.  When 
done  by  law  it  is  taken  without  his  consent.  The 
details  are  immaterial.  Whether  it  be  done  by 
insuring  with  a  certified  private  insurance  company, 
or  by  organizing  an  employer's  mutual,  or  by  paying 
into  a  state  fund,  or  even  by  the  self-insurance  of  a 
large  corporation,  all  are  alike  in  compelling  contri- 
butions to  a  common  fund  adequate  to  pay  the  worker 
promptly  when  the  accident  happens. 

Thus  class  legislation  which  imposes  group  respon- 
sibility works  in  two  ways:  it  compels  the  back- 


58  INDUSTRIAL  GOODWILL 

ward  employer  to  come  up  alongside  the  forward 
employer,  and  compels  the  forward  employer  to  help 
along  the  backward  one. 

In  this  way,  it  recognizes  what  the  socialists  have 
called  the  "  class  struggle."  The  employers  as  a  class 
are  recognized  as  having  a  common  interest  immedi- 
ately in  opposition  to  the  interests  of  the  laborers  as  a 
class.  But  it  recognizes  it  only  in  order  to  recognize 
the  larger  notion  of  solidarity.  Instead  of  refusing 
to  see  and  acknowledge  the  opposition  of  class  in- 
terests where  it  really  exists,  as  was  the  case  when  it 
was  held  that  only  the  individual  was  responsible, 
it  recognizes  class  antagonism  by  enforcing  partner- 
ship and  group  responsibility.  And,  instead  of  the 
socialistic  idea  of  eliminating  class  struggle  by  eliminat- 
ing employers  altogether  and  making  organized 
labor  the  sovereign,  it  eliminates  it  by  making 
employers  responsible  as  a  class  to  laborers  as  a  class. 

In  doing  so  it  makes  them  responsible  for  har- 
monizing the  struggle  between  capital  and  labor. 
And  it  does  so  at  the  point  where  the  class  struggle 
was  most  bitter  and  humiliating — bitter  because 
laborers  felt  that  employers  were  grinding  profit  out 
of  their  flesh  and  blood;  humiliating  because  employers, 
under  the  pressure  of  competition,  were  not  free  to 
safeguard  and  compensate  their  workers  as  they 
knew  they  should. 

Thus  compulsory  compensation,  with  compulsory 
insurance,  enlarges  liberty  more  than  it  restrains  it. 
It  enlarges  it  in  a  different  direction.  It  opens  up  a 
new  field  for  initiative,  individuality,  enterprise  and 
even  profit.  Instead  of  abolishing  profit,  as  the 
socialists  would  do,  it  increases  profits  for  the  more 


SOLIDARITY  59 

competent.  I  know  a  corporation  that  had  been 
paying  about  $5000  a  year  for  insurance  unde  the 
old  employer's  liability  law,  when  it  paid  for  only  a 
small  part  of  the  accidents.  After  the  compensation 
law  had  been  in  effect  a  year  or  so  it  was  paying  only 
about  $2000  a  year,  although  it  was  paying  for  all 
of  the  accidents.  It  had  simply  prevented  accidents. 
To  reduce  accidents  70  per  cent  is  not  unusual 
under  this  new  inducement  of  more  profit.  Pro- 
gressive employers  go  far  ahead  of  what  had  ever 
been  thought  possible  and  far  ahead  of  what  the  state 
could  compel  them  to  do  by  treating  them  as  criminals. 
This  class  of  legislation  is  not  paternalistic  or  coer- 
cive but  stimulating  and  persuasive. 

Not  only  that,  it  leads  the  employer  to  educate  his 
workmen  in  safety.  Mechanical  safeguarding  can 
accomplish  comparatively  little.  It  is  the  "spirit" 
of  safety  in  the  workmen  that  accomplishes  most. 
Industry  is  started  toward  representative  democracy, 
for,  in  order  to  inspire  the  workmen  with  the  spirit 
of  safety,  their  cooperation  must  be  won  by  taking 
their  best  representatives  into  a  partnership  of  acci- 
dent prevention  through  safety  committees  and  safety 
organization  of  the  shop. 

And  this  goes  beyond  the  shop,  into  the  home.  The 
National  Safety  Council,  composed  of  the  safety  men 
of  the  great  corporations,  educates  the  entire  nation 
in  the  spirit  of  safety.1  A  new  profession  is  started. 
The  claim  agent,  who  used  to  follow  up  the  injured 
workman  promptly  after  an  accident,  in  order  to 
build  up  his  employer's  defenses  against  a  damage 

1  See  Proceedings  of  the  National  Safety  Council,  Chicago,  beginning 
1912. 


60  INDUSTRIAL  GOODWILL 

suit,  becomes  the  safety  expert  and  the  safety  booster, 
cooperating  with  all  the  workers  to  benefit  both  them 
and  their  employer.  Civil  and  mechanical  engineers 
enlist.  All  of  the  high  ideals  of  a  profession,  all 
the  missionary  zeal  of  the  enthusiast,  all  the  satis- 
faction of  a  noble  work  that  saves  life  and  health, 
now  animate  the  members  of  this  profession.  They 
perform  a  public  service  while  they  bring  together 
the  employer  and  his  hundreds  of  workers  in  the 
mutual  benefits  of  goodwill.  As  a  profession,  they 
become  independent.  They  lay  down  the  law  of 
safety  and  goodwill  even  to  their  employer,  just  as 
the  lawyer  or  the  accountant  or  the  engineer  tells 
him  how  to  conduct  his  business  within  their  profes- 
sional fields. 

And  government  itself  takes  on  a  new  spirit.  It 
ceases  to  be  mainly  repressive  and  becomes  edu- 
cational. A  new  type  of  factory  inspector  comes  in, 
whose  inspiring  purpose  it  is  to  show  the  employer 
how  to  prevent  accidents,  rather  than  persecute  him. 
And  employers  cooperate  with  government  instead  of 
resisting  it.  They  hire  their  own  safety  inspectors 
and  do  their  own  inspecting,  more  efficiently  than 
government  police  and  courts  ever  could  do  it. 

The  final  result  is,  instead  of  shifting  the  cost  of 
compensation  for  accidents  upon  the  ultimate  con- 
sumer, through  increased  prices  for  products,  there 
is  no  increased  cost  to  be  shifted.  The  laborer, 
indeed,  continues  to  pay  a  large  share  of  the  cost  of 
whatever  accidents  remain  unprevented,  for  no  com- 
pensation, however  great,  can  fully  compensate  for 
loss  of  life  or  limb;  but  the  share  of  cost  that  is  thrown 
upon  the  employer  becomes  no  cost  but  a  source  of 


SOLIDARITY  61 

profit.  The  consumer  gains,  the  laborer  gains,  the 
employer  gains,  and  that  which  started  out  to  compel 
compensation  to  the  laborer  for  his  loss  of  time  and  his 
expense  of  medical  care,  turns  out  to  have  been  the 
greatest  of  all  instruments  yet  invented  for  preventing 
accidents.  It  enlists  for  that  purpose  a  powerful 
motive  that  reaches  even  the  remotest  stock-holder 
who  never  sees  the  worker — the  expectation  of  larger 
profits  through  initiative,  enterprise,  and  good  busi- 
ness. The  solidarity  of  capital  and  labor  becomes  the 
prosperity  of  capital,  of  labor,  and  the  nation. 


• 


VII 
THEORY  AND  PRACTICE 

I  have  mentioned  certain  possible  theories  of  labor. 
There  are  others.  They  are  not  facts,  but  theories. 
They  are  assumptions,  hypotheses,  philosophies, 
"principles,"  so-called,  which  are  employed  con- 
sciously or  unconsciously,  to  explain  the  facts,  or 
to  guide  in  hunting  facts,  or  to  weigh  the  facts,  or  to 
decide  what  to  do  in  view  of  the  facts. 

Everybody  acts  more  or  less  on  one  or  more  of  these 
theories  or  sets  of  principles.  Practical  people  some- 
times pride  themselves  that  they  deal  with  facts  and 
not  theories.  "Two  and  two  are  four."  It  looks 
like  a  fact.  But  it  is  only  a  theory.  It  is  not  true 
unless  it  fits  the  facts.  Two  chairs  and  two  beds 
are  not  four  windows.  Two  dogs  and  two  cats  are 
not  always  four  friends.  The  theory  of  "two  and 
two  are  four"  fits  some  facts  and  not  others.  It 
depends  on  the  facts.  It  is  an  hypothesis,  a  guess, 
an  assumption,  a  "principle."  It  is  empty  until  it 
has  been  filled  with  facts,  and  then  it  takes  good 
judgment  to  fill  it  with  facts  that  fit. 

One  theory  or  set  of  principles  may  be  true  up  to  a 
certain  point,  where  it  comes  in  conflict  with  an 
inconsistent  theory.  Then  that  different  theory  must 
be  introduced.  The  commodity  theory  explains  some 
facts  about  labor,  and  is  a  good  enough  guess  up  to  a 
certain  point.  The  machinery  theory  is  another 

62 


THEORY  AND  PRACTICE  63 

that  is  satisfactory  as  far  as  it  fits  the  facts.  Goodwill 
is  a  different  theory  that  may  or  may  not  be  accepted 
according  to  our  opinions  regarding  the  facts  and  our 
wishes  as  to  what  we  intend  to  do  with  the  facts.  The 
public-utility  theory  supplements  the  others,  and  our 
theories  of  democracy,  of  partnership,  of  solidarity, 
tell  us  what  we  will  do  with  certain  facts  when  they 
come  up. 

People  differ  among  themselves  mainly  because 
they  give  different  weights  to  different  theories.  The 
fanatic,  or  crank,  or  mere  "theorist,"  is  brother  to 
the  autocrat — he  takes  only  one  theory  and  rides  it 
through  to  the  death  penalty.  Such  is  also  the  prac- 
tical man  who  insists  that  two  and  two  are  always  four, 
and  doesn't  stop  to  ask,  two  and  two  whatf  Such  people 
may  become  dangerous  and  then  the  people  with 
different  theories  begin  to  close  in  on  them.  And 
the  man  who  rides  the  commodity  theory  or  the 
machinery  theory  to  the  limit  is  probably  just  as 
dangerous  as  the  one  who  rides  the  anarchist  theory 
or  the  socialist  theory  or  the  theory  of  democracy 
or  partnership  or  solidarity  to  the  limit. 

The  problem  of  industrial  goodwill  is  really  the 
problem  of  finding  out  how  far  the  different  theories 
are  true  and  necessary  at  a  given  time  and  place, 
under  given  circumstances  and  given  facts,  in  order 
to  guide  our  acts,  to  hunt  for  hidden  facts,  to  weigh 
the  facts  when  found,  and  to  get  something  that  will 
work  reasonably.  The  man  who  claims  that  he 
deals  with  facts  and  not  with  theories  is  usually  one 
who  is  simply  riding  his  own  theory  and  calling  it  a 
fact.  He  thinks  that  two  and  two  are  always  four 
because  he  has  emptied  the  theory  of  facts,  or  because 


64  INDUSTRIAL  GOODWILL 

he  has  got  accustomed  to  using  the  theory  only  where 
it  fits  certain  facts,  or  because  he  is  in  the  habit  of 
picking  out  only  that  small  portion  of  all  the  facts  that 
fits  his  wishes  or  theory.  The  sane  man  is  the  man  of 
common  sense,  who  is  willing  to  act  on  different 
theories,  or  rather  on  all  the  theories,  and  is  willing 
to  investigate  and  give  due  weight  to  all  of  the  facts 
in  the  light  of  all  the  theories.  Such  a  man  is  what 
is  known  in  law  as  "  reasonable." 


VIII 
SECURITY 

If  the  commodity  theory  of  labor  is  assumed, 
consciously  or  unconsciously,  then  wages  are  left 
to  supply  and  demand.  If  the  engineering  theory  is 
added,  then  the  individual  laborer  is  made  more  pro- 
ductive by  the  scientific  study  of  him  and  his  job. 
When  the  goodwill  theory  is  adopted,  we  find  the 
beginnings  of  serious  attention  to  irregularity  of 
employment.  The  labor  turnover  is  an  angle  of  the 
modern  insecurity  of  labor  that  has  come  along  with 
liberty.  If  industry  is  irregular  and  uncertain,  then 
a  man  must  be  laid  off  and  taken  on  again  and  the 
number  of  men  hired  and  fired  is  increased.  But 
if  an  establishment  can  give  steady  employment  it 
can  attract  and  hold  workmen  as  against  other 
employers  whose  work  is  irregular.  To  regularize 
employment  is  the  first  step  in  industrial  goodwill. 

For,  of  course,  it  is  not  a  man's  daily  wages  that 
fix  his  welfare,  but  it  is  his  earnings  over  a  period 
of  time.  A  carpenter  at  $4.00  a  day,  200  days  a  year, 
earns  no  more  than  another  at  $2.70  a  day  for  300 
days.  The  high  wages  in  the  seasonal  trades  are 
largely  an  illusion,  and  they  sink  down  to  something 
like  the  general  level  of  yearly  earnings  in  the  steady 
trades.  High  wages  and  high  earnings  are  not  the 
same,  though  sometimes  assumed  to  be  such  when 
we  think  only  of  demand  and  supply. 
6  65 


66  INDUSTRIAL  GOODWILL 

But  periodicity  is  not  uncertainty.  It  comes 
around  regularly.  It  can  be  calculated  in  advance. 
The  amount  of  unemployment  can  be  discounted. 
The  high  wages  in  the  busy  season  are  a  rough  com- 
pensation for  idleness  in  the  off  season.  Uncertainty 
is  different.  It  cannot  be  even  roughly  compensated 
and  is  bound  up  in  the  unpredictable  ebb  and  flow 
of  prosperity  and  depression,  and  in  the  rise  and  fall 
of  each  individual  business  undertaking. 

The  effort  to  regularize  business  is  not  new.  The 
dove-tailing  of  the  coal  and  ice  business,  the  discounts 
on  orders  in  the  dull  seasons,  the  working  to  stock  in 
the  dull  season,  all  and  more  of  them  are  old  ideas. 
But  it  is  a  new  idea  and  a  new  impulse  that  seeks 
scientifically  to  regularize  business  in  order  to  build 
up  goodwill  in  the  labor  market. 

Prior  to  this  idea  the  main  thought  was  to  keep 
the  plant  going  at  full  capacity  or  to  keep  a  skeleton 
organization  of  the  higher  grades  of  employees.  If 
2000  men  can  be  kept  together,  then  10,000  can  be 
added  by  advertising  when  business  picks  up  and 
can  be  dropped  when  it  falls  off.  But  if  labor  turnover 
is  itself  expensive,  then  it  might  pay  to  invest  some 
thought  and  money  in  keeping  the  10,000  together. 

The  dove-tailing  is  then  more  carefully  figured  out, 
and  the  unrecognized  gaps  are  discovered  and  filled. 
Workmen  are  trained  for  diversified  work,  so  that 
they  can  change  from  one  product  to  a  different  one. 
If  they  earn  less  at  this  substitute  work,  they  are 
even  subsidized  by  a  retainer  charged  up  to  the  cost 
of  the  principal  or  more  profitable  product.  They 
are  paid  for  versatility  as  well  as  for  output.  The 
number  of  short-time  jobs  is  reduced  in  one  direction 


SECURITY  67 

and  enlarged  in  other  directions.  The  work  is  arranged 
to  come  along  in  a  steady  flow  instead  of  bunches.  An 
"  emergency  squadron  "  of  all-round  workers  is  trained 
to  help  out  the  workers  or  departments  that  get 
behind,  instead  of  leaving  it  to  the  foremen  to  hurry 
them  up.  Where  the  repair  gang  goes  around  to  fix 
up  machinery  when  it  breaks  down,  the  emergency 
squadron  goes  around  to  fix  up  goodwill.1 

If  all  of  these  methods  fail,  then,  instead  of  laying- 
off  some  of  the  workmen,  all  of  them  are  put  on  short- 
time.  This  is  the  significance  of  the  "  basic  eight- 
hour  day."  It  is  not  an  absolute  eight-hour  day, 
and  much  of  the  argument  against  reducing  the 
hours  of  labor  is  wasted  when  the  " basic  day"  rather 
than  the  absolute  day  is  proposed. 

Almost  every  industry,  including  agriculture,  might 
be  put  on  the  " basic  eight-hour  day"  at  once,  requir- 
ing only  a  little  more  care  in  time-keeping  and  super- 
vision. During  the  first  eight  hours,  regular  time  is 
paid  and  then  time-and-a-half  for  overtime.  This 
is  almost  the  universal  practice  in  trade-union  agree- 
ments. It  permits  by  pre-arrangement  an  increased 
output  in  the  busy  season,  by  adding  more  hours  at 
higher  rates  of  pay  per  hour,  instead  of  more  men  at  the 
same  rates,  and  permits  both  a  reduction  in  hours 
and  a  reduction  in  labor-cost  when  business  falls  off, 
but  without  laying  off  men.  If  labor  turnover  is 
expensive,  then  the  basic  eight-hour  day  is  eco- 
nomical and  profitable. 

The  basic  eight-hour  day  also  meets,  by  arrange- 
ment in  advance,  one  of  the  puzzling  facts  in  the 
psychology  of  labor.  Why  is  it  that  workmen  are 

1  Consult  Slichter,  The  Turnover  of  Factory  Labor. 


68  INDUSTRIAL  GOODWILL 

not  willing  to  take  lower  rates  of  pay  by  the  hour  or 
piece  in  the  dull  season?  If  the  employer  must  cut 
prices  and  offer  discounts  in  order  to  induce  sales 
when  business  falls  off,  or  endeavors  to  stock  up  in 
order  to  furnish  steady  employment,  why  should  not 
labor  take  its  share  of  the  off-season  or  hard-time 
burden  and  do  likewise? 

It  would  seem  to  be  simply  a  question  of  alternatives. 
Labor  does  take  its  share  of  the  burden  of  hard  times 
and  dull  seasons,  in  one  way  if  not  in  another.  If 
one-half  the  force  is  laid  off,  they  carry  the  whole 
of  the  burden  and  the  other  half  carries  none  of  it. 
But  if  the  entire  force  works  half-time  the  burden  is 
distributed.  Workmen  seem  to  prefer  the  former 
alternative.  The  fact  that  some  of  them  are  out  of 
work  and  others  getting  high  wages  seems  less  obnox- 
ious than  for  all  of  them  to  be  at  work  at  lower  wages. 
This  was  not  apparently  their  attitude  before  trade 
unionism  began  to  influence  the  minds  of  workers,  and 
is  often  not  their  attitude  where  trade  unionism  has 
not  yet  taken  hold.  Sometimes  it  is  thought  that  the 
workman  feels  it  to  be  beneath  his  dignity  to  work 
for  less  in  the  dull  season  than  the  standard  scale  in 
the  busy  season.  This  is  a  first  impression.  Back 
of  it  is  experience  and  competition.  In  order  to 
bring  about  a  return  to  the  higher  rate  of  wages  when 
the  good  season  returns,  all  competitors  must  act 
substantially  in  unison.  The  wage-earner  who  works 
at  the  lower  scale  in  the  dull  season  is  not  in  a  position 
to  insist  on  the  higher  scale  in  the  busy  seasoo,  and 
his  employer  is  not  likely  to  pay  it  unless  a  sufficient 
number  of  workers  insist.  And  those  employers  who 
do  advance  to  the  higher  scale  must  face  the  competi- 
tion of  those  who  do  not. 


SECURITY  60 

In  the  clothing  trades  of  New  York,  during  several 
years,  it  was  this  situation  that  brought  on  the  unor- 
ganized strikes  at  the  beginning  of  each  busy  season. 
The  new  prices  would  be  made  in  mass  meetings 
for  the  new  season  and  then,  as  the  dull  season  ap- 
proached, competition  and  unemployment  would  bring 
down  the  piece-prices  until  a  new  season  and  another 
set  of  mass  meetings  restored  them.  In  the  busy 
season  all  of  them  were  working  long  hours  at  high 
piece-rates,  and  in  the  dull  season  all  were  working 
short  hours  at  low  piece-rates.1 

In  other  seasonal  trades  the  experience  is  similar, 
though  less  dramatic.  It  is  not  loss  of  dignity,  but 
loss  of  control,  that  impels  the  workman  to  insist,  if 
he  can,  on  the  busy  price  in  the  dull  season.  Not 
unless  all  competing  wage-earners  move  together  in 
the  ups  and  downs  of  business  can  this  psychology 
of  bargaining  be  seriously  modified. 

But  the  basic  six-hour  day  or  eight-hour  day,  with 
time-and-a-half  or  double-time  for  overtime,  does 
exactly  this  thing  for  workers,  when  paid  by  the  day. 
It  reduces  the  hours  in  dull  times,  and,  by  pre-arrange- 
ment,  reduces  the  rate  of  wages  per  day  more  than  it 
reduces  the  hours.  Thus  it  reduces  both  hours  and 
labor-cost  of  the  product  in  dull  seasons  and  hard 
times.  This  reduction  in  cost,  however,  stops  at 
the  six-hour  or  eight-hour  level.  There  is  no  suffi- 
cient reason,  if  the  eight-hour  level  does  not  furnish 
enough  elasticity,  why  the  basic  seven-hour  day  or 
basic  six-hour  day  should  not  be  adopted  in  those 
industries  where  experience  shows  that  employment 
in  off  seasons  or  hard  times  gets  down  to  thirty-five 
or  forty  hours  a  week. 

1  See  Commons,  Trade  Unionism  and  Labor  Problem*,  pp.  316-335. 


70  INDUSTRIAL  GOODWILL 

Then,  when  the  basic  hour  day  is  adopted  for  day 
workers,  it  is  but  a  matter  of  percentages  or  differen- 
tials added  to  the  piece-rates  for  piece  workers,  so 
that  the  piece-rates  also  shall,  by  pre-arrangement, 
advance  when  the  hours  increase  and  be  reduced 
when  hours  are  reduced.  The  basic  hour  day  for 
day  workers  and  its  corresponding  differential  per- 
centages for  piece  workers  are  a  modified  form  of  profit 
sharing,  since,  in  the  busy  season  or  prosperous  times 
when  there  is  more  work  for  the  employee  and  more 
profit  for  the  employer,  not  only  the  hours  are 
increased  but  also  the  rates  of  pay  per  hour  and  per 
piece  are  also  increased,  and  vice  versa. 

Yet  too  much  may  be  paid  for  security.  Employers 
may  exact  too  high  a  price  for  it.  If  the  price  is 
perpetual  low  wages,  the  price  is  too  high.  If  the 
price  is  systematic  overtime  in  order  to  earn  living 
wages,  the  price  is  too  high.  The  basic  eight-hour 
or  six-hour  day  is  a  good  enough  theory,  when  it  is 
used  solely  for  the  purpose  of  providing  elasticity. 
It  is  vicious  if  used  to  reduce  earnings  and  not  restore 
them.  It  is  good  enough  to  tide  over  depression  and 
to  provide  for  emergencies  and  to  distribute  the  bur- 
den of  unemployment.  It  is  abused  if  it  leads  to 
low  wages  and  systematic  overtime.  It  is  exactly 
this  possibility  of  abuse  that  in  the  end  compels  labor 
unions  and  legislation  to  set  the  absolute  maximum 
hours  of  labor,  which  cannot  be  abused,  regardless 
of  emergencies  or  fluctuations  in  employment.1 

1  Commons  and  Andrews,  Principles  of  Labor  Legislation,  pp.  204r- 
260.  See  also  Docket  37,  National  War  Labor  Board,  Molders  v. 
Wheeling  Mold  and  Foundry  Company  (1918) ;  reprinted  in  American 
Federationist,  November,  1918,  p.  1000. 


SECURITY  71 

The  theory  of  trade  unionism  meets  insecurity  by 
reducing  hours  or  restricting  output.  Apparently, 
if  there  is  not  enough  work  to  go  around,  it  is  pure 
hoggishness  for  some  to  work  long  hours  while  others 
are  unemployed,  or  to  take  the  work  from  others  by 
speeding  up  and  doing  it  all  yourself.  Short  hours 
and  reduced  output  make  work  for  the  unemployed. 

The  theory  is  good  enough  in  hard  times  or  dull 
seasons,  and  indeed  is  a  sound  theory  when  there  is  not 
enough  work  to  go  around.  It  serves  to  distribute 
the  limited  total  amount  of  work. 

But  the  theory  is  not  good  enough  to  meet  the 
fluctuations  of  industry  as  a  whole.  These  fluctua- 
tions are  changes  in  the  total  amount  of  all  kinds  of 
products  that  are  produced,  and  the  fluctuations 
spread  over  the  whole  world  at  about  the  same  time. 
There  would  be  just  about  as  much  unemployment  on 
a  universal  eight-hour  day  as  on  a  universal  twelve- 
hour  day,  and  just  about  as  much  if  everybody 
worked  half  as  hard  as  he  does,  or  twice  as  hard. 
For  unemployment  goes  by  fluctuations.  It  comes 
and  goes  by  seasons  or  by  prosperity  and  depression 
throughout  the  world. 

If  we  had  a  universal  eight-hour  day  in  time  of 
prosperity,  it  would  have  to  be  reduced  to  seven  hours 
or  six  hours,  or  less,  in  time  of  depression,  in  order  to 
distribute  the  reduced  total  amount  of  work.  Elas- 
ticity has  to  be  provided  somewhere  to  meet  these 
fluctuations.  The  elasticity  may  be  provided  by 
laying  off  a  part  of  the  force  in  hard  times  and  taking 
them  back  in  good  times,  or  by  reducing  hours  all 
around  in  hard  times  and  increasing  them  in  good 
times.  The  one  method  is  the  method  of  unemploy- 


72  INDUSTRIAL  GOODWILL 

ment  for  some,  the  other  the  method  of  distributing 
unemployment  and  regularizing  employment  for  all. 
Not  until  some  method  is  found  to  stop  the  world's 
fluctuations  of  prosperity  and  depression  as  a  whole 
can  industry  avoid  the  necessity  of  choosing  one  or  the 
other  of  these  unfortunate  alternatives. 

The  theory  of  socialism  offers  this  method,.,  and  the 
weightiest  argument  for  socialism  is  the  unemployment 
produced  by  capitalism.  The  socialistic  theory, 
indeed,  may  be  said  to  sacrifice  everything  else  in  order 
to  get  security  of  employment.  And,  to  the  unem- 
ployed or  half  employed  workers,  why  should  they 
not  sacrifice  everything  else?  What  is  the  use  of 
private  initiative  without  bread  and  butter?  What 
is  the  use  of  liberty  and  efficiency  without  security? 
Why  should  employers  be  permitted  to  use  unemploy- 
ment as  a  club  to  drive  down  wages  and  to  control 
even  the  opinions  and  politics  of  workingmen? 

Surely,  security  of  employment,  or  at  least  security 
of  minimum  earnings  in  time  of  depression,  is  one  of 
the  tests  of  the  stability  of  capitalism.  Fluctuations 
in  industry  and  employment  are  a  condition  that  must 
be  met  in  one  way  or  another.  Unhappily,  these 
world  fluctuations  make  it  impossible  to  look  for- 
ward to  a  fixed  regular  income  or  regular  work. 
Overwork  and  big  earnings  in  busy  seasons  and  good 
times,  underwork  and  small  earnings  in  dull  seasons 
and  hard  times,  are  the  most  serious  defect  of  industry, 
and  the  one  hardest  to  meet.  But  while  they  make 
impossible  a  fixed  regular  income,  they  do  not  make 
impossible  a  much  greater  security  when  once  atten- 
tion is  seriously  directed  toward  it. 

The  matter  is  one  for  investigation  and  ingenuity 


SECURITY  73 

in  each  particular  case.  Scientific  management  accom- 
plished unbelievable  results  when  once  engineers 
and  business  men  began  to  experiment  according  to 
its  principles.  Scientific  goodwill  may  likewise  be 
ingenious  when  managers  and  employers  begin  to 
experiment  with  it.  The  foremost  of  its  principles  is 
security — the  privilege  of  looking  forward  to  a  secure 
income — and  security  not  for  a  few  but  for  all.  The 
employer,  or  association  of  employers,  or  nation 
of  employers,  that  sets  its  engineers,  accountants, 
statisticians,  scientific  managers,  along  with  the  labor 
organizations  and  shop  committees,  to  work  out  the 
problem  of  security  of  employment,  or  at  least 
security  of  earnings,  is  rescuing  capitalism  at  the  point 
where  it  stands  most  in  need  of  goodwill. 


IX 
LABOR  MARKET 

Goodwill  is  a  competitive  advantage.  Its  value 
consists  in  ability  to  get  or  keep  desirable  customers 
or  workers  away  from  rivals.  The  best  workers,  on 
the  average,  are  not  the  unemployed  but  those 
already  holding  good  jobs.  The  labor  turnover  does 
not  show  itself  strongly  among  this  class  of  workers. 
It  occurs  among  the  newly  hired,  the  less  skilled,  the 
boys,  young  men,  girls,  and  those  holding  the  less 
desirable  jobs. 

It  is  here  that  the  public  interest  also  concentrates. 
Those  who  have  steady  desirable  jobs  are,  of  course, 
not  moving  about,  except  occasionally  when  they  can 
evidently  better  their  position.  Theirs  is  indeed  a 
normal  and  desirable  turnover,  for  it  is  a  necessary 
alternative  to  promotion.  But,  for  the  others,  their 
excessive  turnover  is  a  detriment  to  themselves, 
their  employers  and  the  nation. 

The  natural  and  most  satisfactory  method  of 
recruiting  new  workmen  is  through  their  friends  or 
acquaintances  already  employed  in  the  establishment. 
This  method  works  a  treble  benefit.  It  is  a  com- 
pliment to  the  worker  if  he  is  asked  to  recommend 
somebody;  it  is  a  help  to  the  employer  in  getting  a 
good  selection  of  recruits;  and  it  is  a  help  to  the  new 
man  or  boy  in  getting  over  the  early  period  when  he  is 

74 


LABOR  MARKET  75 

most  likely  to  be  discouraged.     It  attaches  both  tho 
old  and  the  new  worker  to  the  firm. 

But  this  method  assumes  that  the  establishment  is 
already  a  good  place  to  work,  and  it  gets  good  results 
because  good  men  are  already  employed  whose  rec- 
ommendations can  be  relied  upon.  In  short,  it  is 
simply  the  natural  method  by  which  goodwill  is 
always  built  up.  An  establishment  is  fortunate,  and 
indeed  has  about  reached  the  perfection  of  goodwill, 
if  all  of  its  recruiting  for  new  help  is  accomplished  in 
this  way.  It  has  a  steady,  loyal  force  and  it  grows  by 
getting  new  men  who  are  steady  and  loyal. 

No  business  firm  is  quite  so  fortunate  as  this, 
and  not  many  desire  to  recruit  their  entire  force  in 
this  way.  It  applies  to  skilled  or  semi-skilled  men  and 
to  boys  beginning  as  learners,  and  not  generally 
to  common  laborers.  Even  for  these  better  positions 
it  cannot  take  care  of  emergencies.  And  even  at 
its  best  it  runs  the  risk  of  cliques  and  clans  in  the 
shop. 

By  far  the  largest  source  of  supply  in  general  is  that 
of  applicants  seeking  work,  either  at  the  gates  or  at 
employment  offices.  This  means  a  constant  over- 
supply  of  labor  relative  to  demand,  a  " reserve  army" 
of  labor  unemployed  but  ready  to  be  employed. 

Even  in  the  most  prosperous  times  when  there  seems 
to  be  a  real  scarcity  of  labor,  this  reserve  army  is  not 
taken  up  entirely  but  shrinks  only  to  an  "irreducible 
minimum."1  The  lowest  number  of  unemployed 
among  the  trade  unions  of  New  York  over  a  period 
of  twelve  years  was  in  October,  1906,  when  it  was  5.6 
per  cent  of  the  total  number  of  all  who  reported. 

1  Beveridge,  W.  H.,  Unemployment  (1910),  p.  60. 


76  INDUSTRIAL  GOODWILL 

The  highest  number  of  unemployed  was  40  per  cent 
in  January,  1915.1  These  are  mostty  skilled  laborers. 
For  the  unskilled  and  semi-skilled,  if  records  were  kept, 
the  irreducible  minimum  would  probably  appear  much 
above  6  per  cent. 

Here,  again,  it  was  the  necessities  of  war  that 
forced  public  attention  and  public  organization  to 
take  care  of  this  reserve  army  of  labor.  At  the  very 
height  of  the  " drive"  for  more  labor,  a  report  made 
to  the  American  Federation  of  Labor  in  November, 
1917,  showed  large  numbers  of  unemployed  in  dif- 
ferent parts  of  the  country.2  Men  were  scarce 
in  some  sections,  out  of  work  in  others. 

Ohio  was  the  first  state  to  seize  this  problem  cor- 
rectly.3 Other  states  set  out  to  obtain  a  doubtful 
census  of  workers,  but  Ohio  set  out  to  organize  the 
labor  market.  Within  the  space  of  two  weeks, 
21  free  state  employment  offices  were  established, 
each  one  located  with  special  reference  to  railway 
centers.  A  central  clearing  house  was  set  up  at 
Columbus.  The  long  distance  telephone  bills  reached 
$20.00  to  $30.00  a  day.  The  state  superintendent 
is  at  the  telephone  continuously,  communicating  with 
the  20  br/anch  offices.  When  twenty  thousand  men 
were  wanted  to  build  the  cantonment  at  Chilicothe, 
the  contractors  were  warned  not  to  advertise  for  help. 
Advertising  would  flood  the  market  at  Chilicothe  and 

1  New  York  Department  of  Labor,  Special  Bulletin,  No.  85,  July, 
1917,  pp.  25,  50. 

1  Report  of  Proceedings  of  American  Federation  of  Labor,  1917,  p. 
440. 

3  See  articles  by  W.  M.  Leiserson,  Monthly  Review,  U.  S.  Bureau  of 
Labor  Statistics,  April,  1918,  pp.  53-63;  The  Survey,  April  20,  1918,  p. 
6fi. 


LABOR  MARKET  77 

rob  it  at  spots  elsewhere.  It  would  bring  thousands  of 
men  before  the  work  was  ready  and  let  them  wait  in 
idleness.  Neither  was  the  contractor  to  engage  with 
private  employment  offices.  He  agreed  to  hire  all  his 
help  through  the  Columbus  office  and  to  call  for  help 
only  when  needed  and  in  the  exact  number  needed. 
Every  call  was  in  effect  a  contract.  The  Columbus 
office  then  required  each  of  the  branch  offices  to  reg- 
ister all  available  labor  and  to  get  local  employers 
to  furnish  lists  of  skilled  help  whom  they  might  tem- 
porarily release.  Then,  for  a  day  when  the  contractor 
wanted  two  thousand  men,  exactly  two  thousand  men 
were  pro-rated  over  the  entire  state  by  telephone; 
each  local  office  was  ordered  to  send  its  quota;  no 
section  of  the  state  was  robbed  of  labor;  no  workman 
made  a  trip  before  his  work  was  ready  for  him,  and 
the  contractor  received  exactly  the  number  he  was 
ready  to  put  to  work.  Likewise,  on  another  day 
when  one  hundred  were  wanted,  or  five  hundred,  and 
so  on. 

The  same  was  true  when  the  cantonment  was 
finished.  The  workmen  all  were  registered.  Work 
was  found  for  them  in  the  state  or  other  states  and 
they  left  their  Chilicothe  jobs  to  go  directly  to  other 
jobs  waiting  for  them. 

So  simple  and  common-sense  a  plan  of  organization 
ought  to  appeal  to  employers  but  it  did  not  until  the 
crisis  of  a  war  overrode  their  prejudices  or  broke 
their  inertia,  and  even  then,  it  was  only  in  the  single 
state  of  Ohio  that  the  state  authorities  were  daring 
enough  to  seize  the  opportunity  to  enlist  the  right 
executive  ability  and  to  spend  the  necessary  amount 
of  money. 


78  INDUSTRIAL  GOODWILL 

For  employers  are  accustomed  to  advertise  when 
they  want  help,  not  realizing  that  advertising  either 
pulls  workmen  away  from  other  employers  or  assumes 
the  existence  of  a  reserve  army  unemployed.  From 
the  individual  standpoint,  advertising  for  labor  may  be 
successful;  from  the  public  standpoint  it  may  be 
wasteful. 

Or  employers  are  accustomed  to  rely  on  private 
enterprise,  which  in  this  case  is  the  competing  private 
employment  offices,  not  realizing  that  these  have  no 
interest  in  conserving  labor  but  merely  in  getting 
as  many  fees  as  possible  from  as  many  laborers  as 
possible. 

Or,  finally,  employers'  associations  have  their  own 
employment  bureaus  created  to  help  them  in  fighting 
trade  unions,  and  if  the  public  is  allowed  to  set  up 
free  public  offices  and  supplant  their  association 
bureaus,  then  their  power  as  an  organized  class 
over  labor  as  a  class  is  threatened. 

For  these  various  reasons  of  inertia,  prejudice, 
or  loss  of  power,  employers  have  either  not  taken 
hold  or  have  actually  obstructed  the  only  possible 
method  by  which  the  labor  market  as  a  whole  can 
be  organized  in  the  public  interest  as  against  private 
interest  or  class  interest. 

Somewhat  different  have  been  the  obstacles  set  up 
by  labor,  organized  and  unorganized.  Public  employ- 
ment offices  in  various  states  and  cities  have  been 
considered  by  labor  to  be  the  special  perquisite  of 
labor,  created  to  help  labor  find  employment.  Hence, 
labor  must  control  the  offices.  This  means  that 
labor  politicians  who  can  get  the  labor  vote  are  placed 
in  charge  of  the  offices.  Naturally  employers  do  not 


LABOR  MARKET  79 

patronize  them,  and  they  degenerate  into  a  "hang 
out"  for  casual,  inferior,  and  even  pauper  labor. 

Even  when  the  crisis  of  war  was  upon  the  nation 
and  the  disorganized  labor  market  threatened  military 
collapse,  it  required  over  a  year  for  the  trade  unionist 
Secretary  of  Labor  to  be  willing  to  set  aside  the  labor 
politicians  and  the  trade  unionist  pensioners  who  had 
attempted  to  install  a  federal  system  of  employment 
offices.  Finally,  the  Secretary  authorized  the  Ohio 
system  to  be  adopted  and  extended  throughout  the 
nation. 

The  things  essential  in  a  public  employment  sys- 
tem are  competent  officials  and  organization  of  capi- 
tal and  labor.  The  two  go  together.  Expert  offi- 
cials cannot  be  obtained  unless  the  position  offers 
security  and  promotion.  This  means  a  national  sys- 
tem, the  training  of  young  men  and  women  as  begin- 
ners, the  transfer,  promotion  and  salary  increase  in 
higher  positions  through  to  the  very  top  of  the 
system. 

To  get  such  officials  they  cannot  be  appointed  by 
trade  unionists,  nor  by  employers,  nor  even  by  a  civil 
service  commission.  The  latter  gives  necessary  aid  by 
its  written  examinations,  in  eliminating  the  evidently 
unfit,  or  fills  successfully  the  merely  clerical  positions, 
but  the  selection  and  appointment  of  those  who  have 
the  responsibility  of  bringing  employer  and  employee 
together  and  filling  the  jobs  by  workers  who  fit  the 
jobs,  can  be  made  only  under  the  joint  supervision 
and  consent  of  organized  employers  and  organized 
workers.  The  responsibility  of  these  employment 
officials  is  great.  Not  only  must  they  be  "fair"  to 
both  sides  in  the  conflict  of  capital  and  labor,  but 


80  INDUSTRIAL  GOODWILL 

there  must  be  not  even  a  suspicion  of  unfairness. 
They  are  in  a  position  evidently  to  give  a  preference 
to  trade  unionists  or  to  strike  breakers,  and  as  soon 
as  they  do  either,  or  are  suspected  of  leaning  toward 
either,  their  usefulness  is  gone.  Civil  service  exami- 
nations alone  cannot  bring  out  this  quality  of  fairness, 
although  they  are  essential  in  preparing  the  way  for 
it.  It  is  a  matter  of  judgment  and  opinion  of  those 
whose  conflicting  interests  are  at  stake. 

This  means  representative  democracy  in  the  civil 
service.  In  one  way  or  another  organized  capital 
and  organized  labor  must  jointly  have  the  final  de- 
termining voice  in  the  selection  and  promotion  of 
public  employment  officers  and  in  the  supervision 
of  their  work. 

When  once  the  organized  but  opposing  interests 
are  then  brought  together  as  advisers  and  supervisors 
cooperating  with  the  government,  they  themselves 
rise  above  their  class  conflicts  and  suspicions.  I 
have  seen  the  employer's  representatives  under  these 
circumstances  even  join  in  the  selection  of  a  trade 
unionist  and  a  "card"  socialist  for  these  important 
positions,  and  have  seen  the  union  representatives 
join  in  selecting  a  non-union  contractor  or  employer. 

For  "class  conflict"  is  not  irrepressible.  It  can 
be  bridged  over  at  strategic  points.  But  it  cannot 
be  hurried  or  rushed.  It  means  consent,  and  consent 
takes  time. 

The  instincts  of  bureaucracy  often  stand  in  the 
way  of  this  deliberative  partnership.  State  or  gov- 
ernment officials  and  civil  service  commissions  in- 
stinctively feel  that  they  know  their  own  business  and 
are  impatient  in  submitting  their  judgment  to  un- 


LABOR  MARK  XT  81 

official  civilians.  They  select  and  promote  subordi- 
nates according  to  their  own  ideas.  In  this  way 
bureaucracy  grows.  But  in  this  delicate  matter  of 
class  conflict,  at  the  strategic  points  where  it  is  liable 
to  break  out,  bureaucracy  breaks  down.  It  requires 
to  be  supplemented  by  organized  democracy. 

In  running  a  public  employment  office  the  govern- 
ment is  "  going  out  after  business. "  Its  patrons  are 
employers  and  laborers.  If  it  cannot  hold  their 
patronage  it  does  not  get  the  business.  Employers 
cease  to  patronize  and  workers  look  elsewhere  for 
jobs.  In  the  stress  of  war,  when  the  government  is 
almost  the  sole  employer,  the  government  officials 
can  insist  that  the  public  offices  alone  shall  be  pat- 
ronized. In  times  of  peace,  it  is  only  the  day-to-day 
confidence  of  private  employers  that  they  can  get 
the  kind  of  help  they  want,  that  keeps  the  office  on 
its  feet.  If  employers  run  their  own  private  agencies 
they,  of  course,  are  not  disturbed  by  lack  of  confi- 
dence, for  their  control  is  complete.  If  they  patronize 
the  public  offices  they  abandon  insofar  a  powerful 
weapon  devised  to  combat  trade  unionism.  Both 
trade  unionism  and  bureaucracy  may  well  admit 
employers  to  partnership  on  equal  terms  in  controlling 
the  offices,  for  only  in  this  way  can  there  be  perma- 
nently maintained  the  first  great  essential  in  regu- 
larizing employment  in  the  interest  of  both  labor  and 
the  nation,  a  national  employment  system  enjoying 
a  monopoly  as  complete  as  that  of  the  post  office. 
And  employers  and  employers'  associations  should 
lend  their  aid  in  building  up  this  type  of  public 
employment  offices,  for  of  all  the  agencies  that  de- 
moralize labor  and  intensify  the  illwill  of  labor  to- 


82  INDUSTRIAL  GOODWILL 

ward  capital,  none  is  more  unscrupulously  effective 
than  the  competing  private  employment  offices  that 
live  on  the  fees  of  unemployed  workers.1 

1  For  further  details  and  discussion,  see  Commons  and  Andrews, 
Principles  of  Labor  Legislation,  pp.  261-293;  American  Labor  Legisla- 
tion Review,  November,  1915,  March,  1918;  Final  Report  of  Commission 
on  Industrial  Relations,  p.  170  ff;  Employment  Service  Bulletin,  United 
States  Department  of  Labor,  Monthly,  beginning  January  29,  1918. 


INSURANCE 

Unions  affiliated  with  the  American  Federation  of 
Labor  reported  that  they  had  paid,  in  1917,  about 
$3,000,000  in  death  benefits  and  only  $2,400,000  on 
account  of  strikes.  Only  seven  unions  did  not  report 
death  benefits.1 

These  benefits  are  small  in  amount.  Their  average 
is  something  over  $100.00.2  Provision  for  the  family 
after  the  death  of  the  worker  is  seldom  possible  out 
of  these  meagre  amounts.  Only  23  unions  reported 
sick  benefits,  amounting  to  $840,000.  Measured  by 
the  amount  of  money  expended,  more  important 
to  organized  workers  than  provision  for  strikes  or 
sickness  is  the  craving  to  be  decently  buried. 

So  it  is  with  workers  in  general.  Thirty-eight 
million  policies  are  outstanding  of  the  kind  known  as 
" industrial  insurance."3  Probably  thirty  million 
workers  hold  these  policies.  They  are  a  form  of  life 
insurance.  The  average  amount  of  the  policies  is 
about  $130.00.  They,  too,  are  provision  for  decent 
burial. 

The  expense  of  conducting  industrial  insurance  is 
enormous.  In  1916,  a  leading  company  received 

1  Report  of  Proceedings  of  American  Federation  of  Labor,  1917,  pp. 
33,  36. 

1  Twenty-third  Annual  Report  of  the  Commissioner  of  Labor  (1908), 
pp.  213-219. 

1  Insurance  Year  Book,  1918. 

83 


84  INDUSTRIAL  GOODWILL 

about  $62,000,000  in  premiums  and  returned  $29,- 
000,000  to  policy-holders. l  For  every  dollar  paid  for 
insurance  about  53  cents  was  needed  to  meet  expenses 
and  profits. 

This  must  be  so,  for  industrial  insurance  is  the 
smallest  of  retail  insurance.  Premiums  are  paid 
weekly,  or  when  the  pay  envelope  is  full.  The  weekly 
premiums  are  10,  15,  25  cents,  and  the  insurance 
agent  collects  them  in  cash  from  house  to  house. 

The  lapses,  too,  are  many.  Unemployment,  sick- 
ness, accident,  stops  the  payment  of  premiums.  The 
number  of  lapses  in  ten  years  has  been  estimated  at 
nearly  two- thirds  of  the  number  of  policies  written.2 

Besides  the  funeral  benefits  of  organized  labor  and 
the  funeral  benefits  of  industrial  insurance,  there 
are  also  the  unknown  millions  of  assessment  policies 
of  the  unknown  hundreds  or  thousands  of  sickness 
and  death  fraternal  societies.3 

The  heavy  expense  of  retail  insurance  suggests  the 
adoption  of  wholesale  insurance.  The  employer  of 
labor  is  naturally  in  a  position  to  buy  insurance 
wholesale  for  his  employees.  The  first  policy  of 
this  kind  was  taken  out  in  1912  by  a  mail-order  house.4 
Whether  this  class  of  insurance  is  written  with  a 
commercial  insurance  company,  or  whether  the  great 

1  See  Financial  Report  for  the  Year  Ending  December  31,  1917,  Pru- 
dential Insurance  Company,  as  made  to  the  Wisconsin  Insurance 
Commission. 

1  Rubinow,  Social  Insurance,  p.  421. 

1  See  Sydenstricker,  E.,  "Existing  Agencies  for  Health  Insurance  in 
the  United  States,"  Proceedings  of  the  Conference  on  Social  Insurance. 
Bulletin  of  the  Bureau  of  Labor  Statistics,  No.  212,  p.  430. 

4  Morris,  E.  B.,  Group  Life  Insurance  and  Its  Possible  Development. 
Address  before  the  Casualty  Actuarial  and  Statistical  Society,  1917. 


INSURANCE  85 

employing  corporation  finds  that  it  can  more  eco- 
nomically " carry  its  own  insurance"  is  immaterial. 
If  the  employer  carries  the  insurance  himself,  it  is 
known  as  an  " establishment  fund/'  or  "  self-in- 
surance, "  and  is  a  part  of  what  has  come  to  be  known 
as  a  "welfare  system."  If  an  insurance  company 
carries  the  insurance  it  is  known  as  "group  insurance. " 
The  characteristic  of  group  insurance,  as  now  written, 
is  that  it  picks  out  certain  definite  actuarial  items  from 
the  larger  welfare  system  and  deals  with  them  as  a 
separate  problem.  These  are  life  insurance,  old 
age  pensions,  perhaps  also  premature  disability, 
and  sometimes  sickness  insurance. 

The  recent  rapid  spread  of  group  insurance,  whether 
establishment  funds  or  commercial  insurance,  shows 
that  it  fits  a  gap  in  industry  newly  recognized  and 
keenly  felt.  The  financial  inducement  to  the  employer 
is  the  reduction  of  his  labor  turnover.  As  stated  by 
one  of  the  insurance  companies  in  its  advertising 
circulars,  group  insurance  brings  "a  closer  and  more 
intimate  relation  between  employer  and  employee, 
the  existence  of  contentment  and  happiness  in  the 
employee  and  his  family;  the  cessation  of  strife  and 
misunderstanding;  the  production  of  incentive  and 
initiative;  the  amelioration  of  the  living  conditions  of 
the  widow  and  the  orphan;  the  betterment  of  com- 
munity social  conditions;  the  encouragement  and 
valuation  of  the  energies  in  men  that  count  and  the 
actual  return,  measure  for  measure,  in  dividends."1 

Indeed,  if  these  objects  can  be  brought  about  by 
setting  aside  a  premium  of  1  to  2  per  cent  on  the 
pay-roll,  then  the  investment  is  likely  to  be  more 

1  The  Employer  and  The  Employee,  pamphlet. 


86  INDUSTRIAL  GOODWILL 

profitable  than  any  other  expenditure  of  a  similar 
sum. 

For,  group  insurance  is  both  elastic  and  cheap. 
It  can  be  written  to  fit  any  of  the  circumstances  or 
wishes  of  any  employer.  Usually,  it  is  outside  the 
accident  compensation  law.  It  may  cover  only 
life  insurance.  If  so,  it  usually  covers  one  year's 
wages  of  each  employee,  payable  in  monthly  install- 
ments. The  worker's  earnings  thus  are  made  to 
continue  uninterrupted  for  a  year  after  his  death, 
for  the  benefit  of  his  family.  The  employer  may 
insure  every  employee,  from  the  president  of  the 
corporation  to  the  casual  laborer.  The  protection 
may  be  graded  according  to  length  of  service.  It 
may  be  restricted  to  those  who  have  been  with  the 
company  a  year,  or  six  months,  or  one  month,  or  may 
take  effect  for  each  worker  on  the  day  he  goes  to 
work. 

The  policy  may  carry  other  features  in  addition 
to  life  insurance.  It  may  carry  an  old  age  pension, 
beginning  at  sixty-five  or  other  age,  running  for  the 
remainder  of  life,  and  fixed  at  any  amount  deter- 
mined by  the  employer.  It  may  provide  for  invalidity, 
or  permanent  disability,  that  is,  for  premature  old 
age  arising  from  any  cause  not  otherwise  safeguarded. 
It  may,  indeed,  include  sickness  or  temporary  disa- 
bility, though  the  policies  written  with  insurance  com- 
panies have  seldom  gone  this  far. 

The  elasticity  of  group  insurance  is  further  evident 
in  that  it  may  be  made,  and  usually  is  made,  uni- 
versal for  all  employees  in  the  establishment,  without 
medical  examination  or  selection  of  risks.  It  takes 
the  industry  and  the  workers  as  it  finds  them,  and 


INSURANCE  87 

excludes  no  one  on  account  of  physical  defects  not 
otherwise  sufficient  to  exclude  him  from  employment. 
And  the  cost  of  this  life  insurance  is  figured  at  about 
1  to  1M  PS?  cent  on  the  pay-roll.  The  premium 
payments  are  made  monthly,  rising  and  falling  with 
the  pay-roll. 

Presumably,  the  workers  are  insured  only  while 
actually  working,  and  if  laid  off  through  lack  of  work, 
or  if  absent  through  sickness  or  other  cause,  the  in- 
surance lapses,  but  begins  again  when  work  begins. 
These  are  matters  of  detail,  adjustable  as  may  be 
desired  within  the  limits  of  the  rate  of  premium  which 
the  employer  decides  to  appropriate  and  the  extent 
of  the  inducement  which  he  decides  to  offer  to  his 
employees  in  consideration  of  continuing  in  his  service. 

For  the  object  of  group  insurance  is  the  goodwill 
of  labor.  Generally,  wherever  adopted,  whether  by 
means  of  an  insurance  policy  or  by  means  of  self- 
insurance  and  establishment  funds,  it  is  believed  to 
be  followed  by  a  reduction  in  labor  turnover,  or  by 
what  is  equally  valuable,  a  reduction  in  strikes  and  in 
the  power  of  organized  labor  to  attract  employees 
away  from  their  allegiance. 

This  is,  indeed,  the  ultimate  test.  Does  group 
insurance  promote  the  laborer's  welfare  at  the  cost  of 
his  liberty?  Liberty  is  not  an  empty  idea,  but  is  the 
laborer's  means  of  getting  higher  wages  when  times 
are  good  and  employers  are  competing  for  labor.  The 
laborer's  liberty  may  be  worthless  to  him  in  hard 
times  but  it  is  valuable  in  good  times.  The  well-known 
increase  of  labor  turnover  in  good  times  is  a  rise  in 
the  market  value  of  liberty. 

Undoubtedly,  and  perhaps  without  exception,  em- 


88  INDUSTRIAL  GOODWILL 

ployers  maintain  that  their  group  insurance  and  wel- 
fare systems  are  an  addition  over  and  above  wages. 
They  instruct  their  foremen  and  employment  mana- 
gers to  pay  the  market  rate  of  wages,  and  not  to 
use  welfare  or  death  benefits  or  group  insurance  as  a 
talking  point  to  get  below  the  market  rate.  But  the 
real  question  is,  what  is  its  effect  on  the  market  rate 
itself? 

Goodwill  is  a  competitive  advantage.  If  it  does  not 
hold  the  worker's  allegiance  against  the  drawing 
power  of  competing  employers,  then  it  yields  no 
advantage.  Life  insurance,  old  age  pensions,  even 
invalidity  insurance,  may  not  be  strong  enough  to 
hold  the  young  man.  The  benefit  to  him  is  remote 
and  dim,  but  the  wages  offered  elsewhere  are  nearby 
and  vivid.  As  he  grows  older  and  acquires  a  family 
the  expected  benefits  come  nearer  and  brighter, 
and  the  wages  offered  elsewhere  are  comparatively 
less  attractive. 

If  all  competing  employers  provided  exactly  the 
same  benefits,  and  if  the  insurance  took  effect  on  the 
very  day  when  the  worker  goes  to  work,  then  the  thing 
that  would  draw  the  older  worker,  as  well  as  the 
younger,  away  from  one  employer  to  another  would  be 
the  higher  present  wages  and  not  the  higher  future 
benefits.  The  employer  would  have  to  raise  his 
wages  in  order  to  keep  his  workers.  But  as  long  as 
only  a  few  employers  carry  group  insurance  and 
others  do  not,  then  the  few  need  not  raise  their  wages 
to  the  same  extent  as  others,  in  order  to  hold  their 
workers. 

One  or  2  per  cent  increase  in  wages  is  a  very 
small  increase  in  good  times  when  wages  are  going  up 


INSURANCE  89 

5  per  cent  or  10  per  cent  or  even  more.  If  a 
group  insurance  employer  is  able  by  his  promise  of 
future  benefits  to  hold  his  employees  without  ad- 
vancing their  wages  as  rapidly  as  others  do,  then  it  is 
his  employees  who  are  paying  his  insurance  premiums. 
It  only  needs  that  their  wages  lag  1  or  2  per  cent 
behind  the  advancing  wages  of  other  employees  on 
the  labor  market  in  order  to  shift  the  cost  of  the  in- 
surance upon  them. 

That  this  is  the  effect  of  old  age,  life  insurance  and 
invalidity  systems  of  welfare  is  well  known  to  trade 
union  organizers.  They  find  it  difficult  to  organize 
the  workers  who  expect  these  benefits  by  remaining 
where  they  are.  Their  promises  that  the  union  will 
get  them  even  much  higher  wages  now,  perhaps 
at  the  cost  of  a  strike  as  a  last  resort,  has  usually  very 
little  drawing  power  against  the  prospect  of  forfeiting 
the  future  benefits  by  quitting  their  jobs.  For  this 
reason,  mainly,  trade  unions  are  hostile  to  employers' 
group  insurance  and  welfare  systems. 

Their  hostility  is  probably  misplaced.  Group  in- 
surance and  welfare  systems  are  coming,  because,  like 
accident  compensation,  they  fill  the  next  largest  gap 
in  the  struggle  of  capital  and  labor.  It  is  only  a  little 
less  bitter  and  humiliating  that  employers  as  a  class 
should  use  up  their  workers  for  profit  and  then 
neglect  them  and  their  families  in  old  age,  disability, 
and  death,  than  it  is  that  they  should  grind  profits 
out  of  accidents.  Public  opinion,  public  welfare, 
sympathy,  must  surely  support  every  employer  as 
well  as  the  ingenuity  and  enterprise  of  the  casualty 
companies,  when  they  make  this  next  notable  ad- 
vance toward  goodwill  between  employer  and  employee. 


90  INDUSTRIAL  GOODWILL 

The  drawback  is  that  they  cannot  make  it  universal. 
The  backward,  indifferent,  incompetent  or  small 
employer  should  be  brought  up  to  the  level  of  these 
pioneers.  Only  compulsory  insurance  can  bring  this 
about.  If  all  employers  are  required  by  law  to 
insure  all  their  workers  against  death,  old  age  and 
premature  old  age,  then  not  only  is  this  form  of  wel- 
fare made  universal  but  it  cannot  be  practised  at  the 
cost  of  liberty.  The  workers  then  are  freed  from  that 
menace  which  now  threatens  to  play  upon  their 
anxiety  for  decent  burial  and  for  the  future  of  family 
and  self  in  order  to  tie  them  to  their  jobs. 

In  the  interests  of  the  freedom  of  labor  the  hostility 
of  labor  organizers  should  be  directed,  not  against 
group  insurance  in  itself,  but  against  insurance 
which  is  not  universal.  Eventually,  as  voluntary 
group  insurance  enlarges  and  its  effects  in  restricting 
liberty  are  more  clearly  recognized,  it  may  be  ex- 
pected that  trade  unions  will  more  generally  approve 
compulsory  insurance  made  universal  by  law. 

Compulsory  insurance,  like  compulsory  accident 
compensation,  enlarges  liberty  by  restraining  it 
in  other  directions.  And  employers  as  a  class  get 
more  liberty  in  the  right  direction  than  they  lose  in  the 
wrong  direction,  for  then  the  cut-throat  competition 
of  those  who  are  indifferent  or  incompetent  is  elimi- 
nated at  the  point  where  they  intensify  class  antago- 
nism and  prevent  others  from  rising  above  their 
level. 

Sometimes  the  objection  is  raised  that  compulsory 
insurance  of  this  kind  implies  that  the  government 
must  go  into  the  insurance  business  and  greatly 
increase  the  force  of  government  employees.  This 


INSURANCE  91 

is  a  mistake.  Compulsory  group  insurance  merely 
requires  all  employers  to  do  what  others  are  now  doing 
without  compulsion.  They  may  still  insure  with  the 
private  casualty  companies,  or  may  organize  employ- 
er's mutuals,  or  the  largest  may  carry  their  own 
insurance  and  establishment  funds  if  financially 
responsible.  It  is  a  different  proposition  for  the  state 
to  go  into  the  insurance  business  and  administer  a 
fund  like  a  private  company.  States  may  experiment 
in  this  business.  There  is  much  to  be  said  in  favor  of 
a  state  fund,  when  efficiently  conducted,  instead  of 
commercial  insurance.1  But  that  is  a  different  ques- 
tion. The  essential  thing  that  the  state  needs  to  do 
is  to  determine  by  law  the  minimum  amount  of 
benefits  to  be  paid  to  the  workers  or  their  families 
and  then  require  employers  to  take  out  insurance  if 
they  are  not  financially  responsible.  As  is  done  in 
accident  compensation,  the  state  would  set  up  arbi- 
tration boards  to  hear  and  decide  the  disputes  that 
might  come  up. 

1  See  argument*  before  New  York  Legislature,  April  2,  1918,  by 
F.  Spencer  Baldwin,  Manager  of  the  New  York  State  Insurance  Fund, 
and  Thomas  J.  Duffy,  Chairman  Ohio  State  Industrial  Commission. 
New  York  State  Federation  of  Labor,  1918. 


XI 
HEALTH 

The  physical  examination  of  the  first  two  and  one- 
half  million  young  men  for  the  army  revealed  about 
30  per  cent  who  were  physically  unfit.  The  percent- 
ages varied  widely  for  different  states,  the  lowest 
percentage  being  14,  the  highest  47. 1  This  was  the 
first  great  American  survey  of  health.  The  defects 
and  incipient  diseases  there  revealed  were  either 
unknown  to  the  young  men  themselves  or  neglected. 

It  is  roughly  estimated  that,  on  the  average, 
working  people  in  the  United  States  lose  eight  or 
nine  days  a  year  on  account  of  sickness.2  They  and 
their  employers  probably  lose  as  much  more  on  ac- 
count of  slow  work,  poor  work,  accidents,  and  pre- 
mature old  age  caused  by  keeping  at  work  while  they 
are  half-sick.  The  money  loss  is  incalculable  but 
must  be  enormous.3 

A  certain  corporation  with  four  thousand  employees, 

1  Report  of  the  Provost  Marshal  General  to  the  Secretary  of  War,  On 
the  First  Draft  under  the  Selective-Service  Act,  1917  (1918),  p.  83. 

8B.  S.  Warren  and  Edgar  Sydenstricker,  Public  Health  Bulletin 
No.  76,  p.  6.  Cf .  Metropolitan  Life  Insurance  Company,  Community 
Sickness  Surveys;  Proceedings  of  the  Conference  on  Social  Insurance, 
Bulletin  of  the  United  States  Bureau  of  Labor  Statistics,  No.  212 
(1917),  p.  643. 

*  Computations  have  been  made  by  Fisher,  Report  on  National 
Vitality  (1909).  Bulletin  30  of  the  Committee  of  One  Hundred  on 
National  Health,  pp.  119-120;  Rubinow,  Social  Insurance  (1913), 
pp.  214,  222. 

92 


HEALTH  93 

some  seven  years  ago,  started  a  compulsory  sick 
benefit  society  for  its  employees.  Every  employee  is 
required  to  pay  50  cents  a  month  into  the  fund,  and 
the  corporation  adds  an  equal  amount.  No  employee 
is  taken  on  without  a  physical  examination.  The 
company  stands  to  lose  a  considerable  amount  of 
money  expended  in  training  employees,  and  each  man 
is  an  investment.  On  this  account  the  risks  in  the 
benefit  society  are  selected  risks,  and  the  dollar  a 
month  for  each  employee  goes  further  than  it  would 
for  unselected  risks.  It  has  been  found  that,  while 
on  the  average  the  estimated  time  lost  through 
sickness  by  workpeople  is  eight  or  nine  days  a  year, 
this  company  has  reduced  the  lost  time  to  four  and 
one-half  days.  Since  the  average  earnings  of  the  men 
are  about  $3.00  a  day,  it  needs  only  a  saving  of  two 
or  three  days  in  lost  time  to  enable  the  workmen  to 
make  up  the  dues  of  $6.00  a  year  in  the  benefit 
society. 

But  the  benefit  society  takes  care,  also,  of  most  of 
the  ailments  of  the  worker's  family,  and  when,  at 
the  end  of  seven  years,  it  was  found  that  a  reserve 
fund  of  $60,000  had  accumulated,  the  society,  with- 
out additional  dues,  added  the  care  of  the  mother 
at  child-birth  and  all  obstetrical  treatment.  So  that 
at  a  cost  of  $12.00  a  year  for  each  employee,  all  of 
his  own  medical  care  and  that  of  his  family  are 
provided. 

It  was  found  at  first  that  the  workers  did  not 
sufficiently  call  upon  the  physicians  of  the  society  in 
the  early  stages  of  illness,  and  so  the  society  stationed 
physicians  at  each  shop  every  morning  where  the 
workmen  could  consult  them  without  extra  time  or 


94  INDUSTRIAL  GOODWILL 

fear  of  being  considered  a  nuisance.  In  short,  the 
society  encouraged  the  very  thing  that  is  often  raised 
as  an  objection  to  universal  health  insurance,  namely, 
the  multiplication  of  unnecessary  calls  upon  the  doctor. 

And  this  is,  indeed,  the  prime  object  of  health 
insurance — not  the  cure  of  illness  after  it  has  set  in, 
but  the  prevention  of  illness.  And  the  only  complete 
preventor  of  illness  is  the  doctor.  The  government 
of  the  United  States  furnishes  President  Wilson  with 
a  high-grade  physician  who  attends  him  constantly, 
not  with  medicines  but  with  advice.  A  millionaire 
has  his  private  physician.  This  benefit  society  does 
for  four  thousand  workers  daily  what  the  nation  or 
great  wealth  does  for  the  President  or  the  millionaire. 

The  benefit  society  engages  its  physicians  and 
surgeons  on  part-time  contracts,  the  minimum  com- 
pensation being  at  a  salary  rate  of  $3000  a  year. 
The  physicians  have  also  their  private  practice.  The 
society  has  constantly  in  its  service  two  nurses  for 
home  visiting,  but  does  not  pay  for  hospital  care. 

The  primary  object  of  this  association  is  sickness 
prevention.  But  when  sickness  cannot  be  prevented, 
the  loss  of  wages  is  partly  made  up  by  cash  benefits. 

Here  is  the  difficult  problem  of  health  insurance. 
At  one  extreme,  if  a  cash  benefit  is  paid  equal  or 
approximate  to  the  lost  wages,  the  premium  on  feigned 
sickness  is  so  great  as  to  amount  to  a  general  demorali- 
zation of  the  entire  labor  force.  At  the  other  extreme, 
if  no  sick  benefit  is  paid,  the  anxiety  of  the  worker 
over  the  loss  of  wages  is  a  serious  impediment  to 
recovery  and  to  that  state  of  mind  which  is  willing 
to  lay  off  long  enough  to  get  well. 

This  benefit  society  has  hit  upon  a  workable  medium 


HEALTH  95 

between  these  two  extremes.  No  cash  benefit  is 
paid  during  the  first  seven  days  laid  off.  Then  $1.00 
a  day  is  paid  for  100  days.  Then  50  cents  a  day  for 
the  second  100  days.  Then,  if  permanent  invalidity 
ensues,  the  lump  sum  of  $150.00  provided  in  the  by- 
laws, is  paid  to  the  worker,  and  thereafter  he  both 
loses  his  employment  with  the  company  and  his 
membership  in  the  society.  A  funeral  benefit  also 
is  paid. 

The  society  is  strictly  a  temporary  sickness  society 
and  does  not  provide  for  life  insurance,  for  super- 
annuation, or  for  permanent  disability.  As  a  strictly 
sickness  society  it  recompenses  the  worker  for  his 
lost  wages  to  the  extent  of  perhaps  one-third  or  one- 
fourth  of  his  loss,  and  thus  relieves  his  anxiety  in 
part  but  not  enough  to  tempt  malingering.1 

What  does  the  corporation  gain  by  means  of  this 
society?  It  spends  some  $25,000  a  year  at  the  rate 
of  $6.00  for  each  employee,  or  say  one-half  of  1 
per  cent,  on  its  pay-roll,  and  what  does  it  get  in  return 
that  justifies  the  management  in  their  reports  to 
the  stockholders? 

How  shall  we  measure  the  intangible  asset,  good- 
will? How  shall  we  measure  the  money  value  of 
good  health? 

In  the  first  place  we  must  measure  it  partly  by 

1  The  most  complete  and  detailed  analysis  of  the  features  of  an  Em- 
ployees' Benefit  Association  is  the  series  of  articles  by  W.  L.  Chandler 
in  Industrial  Management,  beginning  February,  1918.  A  voluntary 
association  has,  perhaps,  an  advantage  over  the  compulsory  system 
above  described.  It  is  not  intended  to  close  employment  against 
those  incapable  of  passing  a  physical  examination.  See  By-Laws, 
Employee's  Mutual  Benefit  Association,  Milwaukee  Electric  Railway 
and  Light  Company. 


96  INDUSTRIAL  GOODWILL 

faith.  It  rests  in  part  on  the  "will  to  believe." 
No  measurement  can  be  devised  that  will  satisfy 
the  short-sighted  or  greedy  stockholder.  Goodwill 
and  good  health  are  an  overhead.  They  belong  to 
I'esprit  de  corps,  the  spirit  of  the  going  concern, 
the  morale  of  confidence  and  hope. 

And  a  benefit  society  cannot  be  separated  out  and 
measured  apart  from  the  other  intangible  factors  that 
go  to  make  up  goodwill,  th  Ife  employees  are  con- 
vinced or  even  suspicious  that  the  benefit  society 
is  imposed  in  order  to  tie  them  to  their  jobs  and  to 
shift  over  to  them  in  low  wages  the  money  contributed 
by  the  company  under  the  name  of  benefits,  then, 
instead  of  an  asset  it  becomes  a  liability.  I  have 
known  of  benefit  societies  which  caused  strikes  in- 
stead of  goodwill.  The  very  same  schedule  of  dues, 
physical  examinations,  medical  care  and  cash  benefits, 
in  the  hands  of  one  management  will  win  loyalty, 
in  the  hands  of  a  different  management — ill  will. 
There  is  no  invariable  standard  of  measurement 
that  can  pick  out  the  benefit  society  and  measure  it 
independently  of  the  other  parts  of  the  company's 
policy  toward  labor. 

We  may  pick  out  symptoms  and  they  are  good  as 
far  as  they  go,  but  not  conclusive.  We  may  show 
the  reduction  in  lost  time  from  improved  health,  the 
reduction  in  accidents  from  improved  attention, 
the  reduction  in  turnover  from  improved  loyalty,  the 
increase  in  output  from  improved  vigor,  but  these 
are  partial  and  not  convincing.  Each  establish- 
ment must  be  judged  as  a  whole  and  by  itself.  All 
of  the  facts  and  all  of  the  parts  must  be  put  together, 
and  then  a  large  element  of  faith  in  humanity,  of 


HEALTH  97 

enthusiasm  for  human  welfare,  of  pride  in  good  work, 
and  even  of  patriotism  in  contributing  to  the  physical 
and  moral  health  of  the  nation,  must  be  added  before 
health  insurance  of  one's  employees  will  appeal  to 
the  management  or  the  stockholders  as  a  good 
investment. 

Here  is  exactly  where  compulsory  health  insurance 
comes  in.1  Only  a  small  proportion  of  all  employers 
and  corporations  are  sufficiently  educated,  interested, 
public  spirited,  and  financially  able  to  adopt  health 
insurance  for  their  employees.  The  state  can  never 
hope  to  bring  the  others  up  to  the  level  of  the  most 
progressive,  but  it  can  establish  minimum  standards 
and  require  all  to  come  up  to  a  certain  lower  level. 
If  this  is  wisely  done,  then  the  more  progressive  are 
in  a  position  to  go  as  far  ahead  of  the  legal  minimum 
as  their  ingenuity  and  enterprise  may  suggest. 

There  have  been  many  and  various  proposals  put 
forward  for  universal  health  insurance.2  It  can  hardly 
be  expected  that  all  the  details  can  be  worked  out 
satisfactorily  in  advance.  There  is  room  for  many 
experiments  and  much  ingenuity.  Especially  must 
any  satisfactory  plan  be  based  on  existing  American 
conditions  and  afford  room  for  private  initiative  in 
working  out  the  details. 

1  Arguments  pro  and  con  of  health  insurance  will  be  found  in  Com- 
mons and  Andrews,  Principles  of  Labor  Legislation,  p.  385  ff.  See  refer- 
ences there  cited :  Hoffman,  Facts  and  Fallacies  of  Compulsory  Health 
Insurance,  published  by  Prudential  Press,  Newark,  N.  J.;  Rubinow, 
Social  Insurance  (1913);  American  Association  for  Labor  Legislation 
publications. 

1  See  especially  draft  of  bill  introduced  by  Senator  Nicoll,  New  York 
Senate,  February  18,  1918.  Also  model  bill  recommended  by  a  com- 
mittee of  the  American  Association  for  Labor  Legislation,  131  E.  23d 
St.,  New  York. 


98  INDUSTRIAL  GOODWILL 

Most  of  the  American  states  are  already  in  a  posi- 
tion to  authorize  and  require  these  experiments  to  be 
made.  They  have  their  accident  compensation  com- 
missions, their  schedules  of  indemnity,  their  organiza- 
tion of  compulsory  accident  insurance.  To  these  may 
be  added  health  insurance  by  requiring  of  all  employers 
a  minimum  provision  for  medical  and  hospital  supplies 
and  treatment  and  a  minimum  attendance  of  qualified 
physicians  and  nurses. 

Whether  employees  should  be  required  to  contribute 
equally  with  the  employer  depends  on  the  extent 
to  which  the  benefits  are  carried.  If  the  families 
of  wage-earners  are  included,  as  well  as  the  wage- 
earner  himself,  the  employee  should  evidently  con- 
tribute. If  the  employer  is  already  carrying  group 
insurance  or  a  fund  for  old  age,  disability  and  death, 
the  employee  should  evidently  contribute  to  the  sick- 
ness fund.  The  essential  thing  is  that,  where  em- 
ployees contribute  they  have  equal  representation 
in  the  management. 

If  their  plan  meets  the  minimum  standards  of  the 
law  and  shows  the  financial  security  required  for  an 
insurance  scheme,  it  is  then  certified  by  the  state 
authorities  and  the  association  is  permitted  to  proceed. 
The  state  authority  retains  supervision  and  acts  as 
an  appellate  court  in  the  settlement  of  disputes. 

These  are  perhaps  the  essential  minimum  legal 
requirements.  Over  and  above  them  remains  oppor- 
tunity for  all  or  any  voluntary  schemes,  designed 
by  employers,  trade  unions  or  fraternal  societies. 
Fraternal  societies  and  trade  unions  find  their  field 
in  the  provision  for  cash  benefits.  It  would  probably 
be  preferable  that  the  cash  benefits  should  be  left 


HEALTH  99 

entirely  to  voluntary  schemes,  and  that  the  legal 
minimum  standards  should  make  no  requirement 
whatever  of  cash  benefits  in  case  of  temporary  disa- 
bility through  illness. 

Two  practical  considerations  lead  to  this  suggestion : 
if  cash  benefits  are  required  by  law,  then  the  thought 
and  energies  of  employers,  employees  and  state  offi- 
cials are  diverted  away  from  the  prime  object  of 
health  insurance,  which  is  sickness  prevention  with 
its  medical  and  hospital  care  and  early  diagnosis. 
If  cash  benefits  are  required  by  law,  then  innumer- 
able disputes  arise  as  to  the  amount  of  benefits;  the 
dangerous  menace  of  malingering  is  forced  into  the 
problem;  suspicion  and  invidious  investigations  of 
individuals  are  fomented  by  law.  But  with  cash 
benefits  eliminated  from  the  requirements  of  the  law, 
all  of  the  funds  and  all  of  the  energies  of  all  parties, 
so  far  as  legislation  is  concerned,  are  directed  to  the 
single  purpose  of  adequate  care  for  sickness,  adequate 
hospital  and  medical  equipment,  and  adequate  meas- 
ures of  prevention. 

Equally  important  is  the  other  practical  considera- 
tion. Relieved  of  medical  and  hospital  care  and  sick- 
ness prevention  the  voluntary  associations  of  trade 
unions,  fraternal  societies,  and  employers'  mutuals 
have  a  free  and  exclusive  field  for  that  which  they 
can  do  much  better,  the  provision  for  cash  benefits. 

This  field  they  have  begun  to  cultivate.  Almost 
none  of  the  local  trade  unions  that  provide  sick 
benefits,  make  any  provision  for  medical  and  hospital 
service,  or  for  regular  employment  of  physicians,  or 
for  the  prevention  and  early  diagnosis  of  disease. 
If  they  employ  a  physician  it  is  to  prevent  malinger- 


100  INDUSTRIAL  GOODWILL 

ing.1  Their  sick  benefits  are  nearly  always  simply 
cash  benefits.  They  leave  the  field  of  protection 
and  prevention,  medical  and  hospital  treatment, 
practically  untouched,  and  limit  themselves  to  the 
field  of  cash  payments  at  time  of  sickness.  A  com- 
pulsory system  of  cash  benefits  would  interfere  with 
their  work.  A  compulsory  system  of  insurance  for 
medical  and  hospital  care  not  only  would  not  inter- 
fere with  the  work  of  unions,  fraternals  and  mutuals, 
but  would  strengthen  the  appeal  for  voluntary  cash 
insurance. 

On  the  other  hand,  health  insurance,  covering  the 
first  three  months  or  six  months  of  sickness,  should 
be  combined  with  group  insurance  or  establishment 
funds  for  old  age,  death  and  permanent  disability 
beginning  at  the  end  of  the  health  insurance  period. 
Here  cash  benefits  are  evidently  required,  and  are 
not  likely  to  be  provided  by  other  existing  agencies. 
And,  most  of  all,  here  the  menace  of  malingering  no 
longer  holds  as  a  valid  objection.  The  principles  of 
group  insurance  have  already  been  worked  out  sci- 
entifically by  private  insurance  companies.  Perma- 
nent disability  begins  at  the  end  of  say  three  months 
or  six  months  illness.  Superannuation  begins  at  say 
sixty  or  sixty-five  or  seventy  years  of  age.  The 
amount  of  the  benefits  is,  of  course,  determined  by 
the  amount  of  the  premiums  that  seem  expedient 
to  be  required. 

There  is  a  sentimental  objection  to  these  plans  of 

1  Sydenstricker,  E.,  "Existing  Agencies  for  Health  Insurance  in  the 
United  States,"  Proceedings  of  the  Conference  on  Social  Insurance, 
Bulletin  of  the  United  States  Bureau  of  Labor  Statistics,  No,  212 
(1917),  pp.  467,  473. 


HEALTH  101 

mandatory  insurance.  It  is  said,  "Why  should  an 
honest,  hard  working,  thrifty,  employee  be  compelled 
to  contribute  to  a  fund  to  support  the  thriftless  and 
vicious  employee  whose  illness  and  disability  are 
brought  on  by  his  own  fault  ?"  "  Why  should  a  pros- 
perous employer  be  compelled  to  contribute  to  the 
funds  that  help  out  the  less  prosperous,  or  be  compelled 
to  contribute  to  workmen  and  their  families  for  whose 
illness  he  is  not  responsible  ?" 

These  questions  are  naturally  suggested  by  the 
extremely  individualistic  American  way  of  looking  at 
things.  But  modern  competitive  industry,  national 
peril,  and  solidarity  of  interest  are  answering  them. 

A  serious  menace  to  the  wages  of  workingmen  is 
the  cut-throat  competition  of  the  less  competent.  If 
10  per  cent  of  the  workingmen  are  thriftless  and  vicious, 
then  the  competition  of  that  10  per  cent  is  a  load  on 
the  neck  of  the  90  per  cent.  They  and  their  unfortu- 
nate families  are  thrown  upon  the  labor  market,  and 
it  is  one  of  the  benefits  of  universal  insurance  that  it 
helps  in  some  degree  to  take  them  off  the  market. 
The  honest,  thrifty  worker  is  already  paying  a  part 
of  the  cost  of  the  thriftless  and  vicious,  but  he  is 
paying  it  through  the  invisible  pressure  of  competi- 
tive wages.  Health  insurance,  properly  worked  out, 
is  a  visible  payment  designed  to  remove  that  invisible 
pressure. 

And  why  should  the  employer  pay  when  he  is  not 
responsible?  This  was  the  very  question  raised 
against  universal  accident  compensation.  Since  that 
question  has  been  answered,  individual  employers 
have  been  paying  for  accidents  caused  by  other  em- 
ployers or  by  their  own  employees.  So  it  is  with 


102  INDUSTRIAL  GOODWILL 

health  and  disability  and  old  age.  Employers  as  a 
class  are  concerned  with  the  health  and  efficiency 
of  labor  as  a  class.  They  are  already  paying  invisi- 
bly for  illness  and  inefficiency.  Their  costs  are  al- 
ready shifted  more  or  less  upon  the  public.  To  pay 
openly  into  insurance  funds  is  but  to  pay  visibly 
toward  removing  an  indefinite,  but  actual,  invisible 
expense. 

Thus  the  answer  to  the  individualistic  question  is 
the  solidarity  of  interests.  Competition  distributes, 
by  its  unseen  but  powerful  pressure,  the  accidents, 
illness  and  disabilities  of  labor  among  all  employers, 
all  employees,  and  the  public.  Neither  the  total 
expense  nor  the  share  borne  by  either  can  be  measured. 
But  health  insurance,  with  disability  and  superannua- 
tion, measures  off  and  distributes  among  them  all 
a  minimum  expense  for  reducing  an  immeasurable 
but  enormous  expense. 

But  this  argument  of  solidarity,  like  the  argument  of 
individualism,  cannot  be  carried  too  far.  It  is  as 
false  as  the  other  if  pushed  to  extremes.  Carried  to 
the  extreme  it  is  socialism,  just  as  individualism 
carried  to  its  extreme  is  anarchism.  The  reasonable 
man  and  the  reasonable  nation  must  find  by  experience 
and  wisdom  the  point  where  the  two  principles  can 
be  combined  and  get  the  maximum  value  from  the 
combination. 

It  is  for  this  reason  that  the  principle  of  solidarity, 
or  compulsory  insurance,  should  go  to  the  extent  of 
only  the  minimum  necessary  to  get  the  one  essential 
thing — national  health.  If  properly  worked  out, 
this  insurance  principle  enlists  in  the  cause  of  sickness 
prevention  and  national  efficiency  the  most  tangible 


HEALTH  103 

and  effective  of  earthly  inducements — the  financial 
inducement.  By  reducing  the  amount  of  sickness 
and  by  postponing  the  period  of  disability,  the  monthly 
insurance  premiums  are  reduced,  and  can  be  seen  and 
measured  by  every  employer  and  every  worker. 

And  it  cannot  be  said  that  modern  employers  as  a 
class  are  not  responsible  in  part  for  the  early  disa- 
bilities and  short  working  life  of  laborers  as  a  class. 
While  salaried  men,  professional  men,  employers 
themselves,  and  those  who  make  an  early  escape 
from  manual  labor,  begin  to  reach  their  high  levels  of 
efficiency  at  forty  years  of  age,  the  modern  factory 
worker  has  passed  his  zenith  at  forty.  His  long  hours 
of  work,  his  compulsory  work  when  ill,  his  periods 
of  unemployment,  his  fatigue  and  confinement  are 
among  the  outstanding  causes.  No  individual  em- 
ployer is  responsible.  No  individual  can  do  much 
better  than  his  competitors.  All  are  responsible 
together,  for  competition  forces  them  into  a  solidarity 
of  responsibility.  All  must  therefore  work  together 
to  meet  their  joint  responsibility.  And  compulsory 
insurance,  up  to  a  certain  point,  is  the  modern  method 
of  enforcing  joint  responsibility. 

Perhaps,  at  no  other  point  will  the  enforcement  of 
this  joint  responsibility  of  employers  be  more  awaken- 
ing than  in  the  attention  it  will  focus  on  the  evils  of 
the  piece-work  system.  The  piece-work,  bonus  or 
premium  system,  enables  employers  to  evade  their 
responsibility  for  the  health  and  long  life  of  workers. 
It  throws  the  responsibility  on  the  worker  himself 
for  exerting  himself.  By  its  continuous  nervous 
strain  day  after  day  and  year  after  year,  it  eventually 
wears  out  the  worker.  It  wears  out  women  faster 


104  INDUSTRIAL  GOODWILL 

than  men,  the  ambitious  faster  than  the  sluggish, 
and  eventually  weakens  the  tissues  and  admits  the 
germs  of  disease. 

Doubtless  " payment  by  results"  is  a  necessary 
method  of  payment,  but  carried  to  the  extreme  of  the 
piece-work  system,  it  is  destructive  of  results  through 
premature  disability.  At  no  point  in  the  industrial 
system  is  there  greater  need  of  focusing  the  ingenuity 
and  enterprise  of  employers,  of  employment  managers, 
engineers  and  industrial  service  workers,  than  at  the 
point  of  taking  a  long-life  view  of  piece-work.  The 
system  doubtless  gets  immediate  results  hour  by 
hour,  but  somebody  must  pay  for  its  later  results. 
The  employer  shifts  these  later  results  on  the  worker 
himself  and  on  the  nation  through  sickness,  premature 
old  age  and  short  life.  Mandatory  insurance  for 
health,  for  disability,  superannuation  and  death, 
not  merely  requires  employers  as  a  class  to  carry  a 
part  of  these  burdens,  but,  most  of  all,  induces  them  as 
a  class  to  engage  their  business  ability  and  ingenuity 
in  the  direction  of  reducing  the  amount  of  the  burden 
itself  by  earnestly  investigating  and  then  effectively 
removing  the  causes  that  produce  the  burden. 

And  this  responsibility  is  not  responsibility  merely 
to  labor — it  is  responsibility  to  the  nation.  The  na- 
tion took  millions  of  workers  from  the  factories  and 
shops.  The  first  thing  it  did  was  to  attend  to  then* 
health.  It  gave  them  an  unexpected  vigor  that  fac- 
tory and  shop  had  suppressed.  And  when,  with  these 
powerful  new  bodies  and  this  aroused  patriotism  they 
fought  in  Europe  for  national  liberty,  they  also  fought 
for  the  nation's  business.  Shall  they  afterward  go 
back  into  the  factory  and  shop  and  again  be  subjected 


HEALTH  105 

to  the  competitive  deterioration  of  health?  Neither 
their  own  aroused  intelligence  nor  the  nation's  future 
industrial  progress  will  permit  it.  They  have  learned 
the  power  of  joint  action  and  the  spirit  of  comrade- 
ship. The  awakened  employer,  who  sees  the  future, 
will  surely  provide  for  the  future  and  will  arouse  his 
sluggish  fellow-employer.  And  can  he  do  it  in  any 
other  way  so  effectively  as  by  placing  on  all  employers 
the  legal  duty,  first  of  all,  of  joining  in  mutual  asso- 
ciations of  employer  and  employee  to  safeguard  the 
health  and  prolong  the  working  life  of  them  all? 


XII 
THE  SHOP 

The  five  or  six  thousand  employees  of  a  manu- 
facturing company  went  out  on  strike  without  previous 
organization.  After  several  weeks  the  company  made 
a  settlement  and  took  the  workers  back  as  a  union. 
The  main  demand  of  the  strikers  was  higher  wages. 
This  was  granted.  But  the  company  discovered 
that  what  they  wanted  was  control  of  discipline.  The 
company  thought  that  it  had  been  running  its  own 
business,  but  it  discovered  that  the  labor  end  of 
its  business  had  been  run  by  foremen  and  superin- 
tendents. The  issue  with  the  union  turned  out  to  be 
whether  the  union  or  these  minor  executives  should 
control  the  discipline. 

Wages  were  the  apparent  demand.  The  real 
grievance  was  the  accumulation  of  petty  complaints, 
often  unfounded,  against  the  minor  executives  of  the 
company.  The  company  thought  that,  by  granting 
the  demand  for  wages  they  could  have  peace  for  a 
while.  They  found  that  nearly  every  rule  or  com- 
mand given  by  their  minor  executives  brought  on  the 
menace  of  a  strike.  The  issue  was  not  wages  but 
discipline.  And  this  is  always  the  issue  of  unionism. 

Soon  after  the  agreement  became  effective  the  com- 
pany relieved  the  executives  of  their  final  power  of 
discipline  and  established  a  labor  department  with  a 

106 


THE  SHOP  107 

chief  who  reports  direct  to  the  company.  The 
labor  department  investigates  all  complaints;  rec- 
ommends to  the  company  a  course  of  action;  conducts 
all  negotiations  with  the  union;  superintends  all 
hiring  and  firing;  manages  the  hospital,  rest  room  and 
welfare  work;  is  responsible  for  the  observance  of 
state  and  municipal  labor  laws;  endeavors  to  educate 
the  foremen  and  workers  in  conciliation;  has  direction 
of  all  adjustments  of  wages,  piece  prices  and  operat- 
ing efficiency.  In  short,  discipline  is  separated  from 
production. 

Considerable  ingenuity,  experimentation  and  a  code 
of  procedure  were  necessary  to  make  this  separation. 
The  foreman  now  does  not  discharge  a  worker.  He 
gives  him  a  " complaint  memorandum."  If  this 
is  disregarded  he  gives  him  a  " suspension  slip." 
This  removes  him  from  the  pay-roll  until  reinstated 
by  the  labor  department.  This  department  acts 
at  once.  It  either  restores  him  "on  probation," 
or  orders  a  temporary  lay-off  or  a  discharge.  The 
worker  then  has  an  appeal,  if  he  wishes,  to  the  "trade 
board."  This  is  a  shop  committee  of  one  workman 
and  one  foreman,  presided  over  by  a  neutral  chairman 
employed  and  paid  equally  by  the  company  and  the 
union.  It  gives  a  hearing,  takes  testimony,  and  may 
order  reinstatement  or  modification  of  the  penalty. 

Finally,  an  ultimate  appeal  for  either  side  lies  to 
the  "board  of  arbitration" — one  person  appointed 
by  the  company,  one  by  the  union,  one  by  agreement 
of  both  parties.  The  "trade  board"  is  the  "trial 
court" — it  gives  the  parties  a  hearing,  investigates 
facts,  takes  testimony.  The  "board  of  arbitration " 
is  the  supreme  court  of  the  shop — it  decides  ques- 


108  INDUSTRIAL  GOODWILL 

tions  of  law,  interprets  the  constitution,  makes  the 
law. 

The  machinery  seems  complex.  It  would  be  com- 
plex if  it  had  to  act  on  every  case  of  discipline.  Autoc- 
racy is  always  more  simple  than  democracy.  It 
acts  without  consulting.  Consultation  takes  time 
and  acts  according  to  rules.  After  this  particular 
machinery  got  into  working  order  many  months 
have  passed  at  times  without  an  appeal  to  the  high 
board  of  arbitration. 

The  reason  is,  " precedent."  A  case  once  decided 
is  a  rule  of  law  for  all  succeeding  cases.  Like  the 
Constitution  of  the  United  States,  the  agreement 
has  become  a  " government  of  law  and  not  of  men." 
A  man  is  not  deprived  of  his  job  without  "due  process 
of  law."  This  is  the  difference  between  democracy 
and  autocracy,  and  the  reason  why  the  machinery  of 
democracy  is  complex  and  that  of  autocracy  is  simple. 

But  when  men  learn  to  act  according  to  law  and 
precedent,  then  democracy  also  is  simple  enough. 
Its  machinery  is  called  in  only  when  men  are  alleged 
to  act  contrary  to  the  rule  of  law.  Its  strength  resides 
in  being  ready  to  act  and  not  needing  to  act. 

This  is  the  reason  why  democracy  needs  education. 
When  this  particular  shop  scheme  was  started,  many 
of  the  workers  were  newly  arrived  immigrants, 
acquainted  only  with  the  despotisms  of  Austria, 
Hungary,  Russia.  Many  were  what  is  now  known 
as  bolshevistic,  or  revolutionary,  socialists  opposed 
to  the  wage  system  and  believers  in  the  immediate 
sovereignty  of  labor.  Many  were  successful  agitators, 
hostile  to  employers  as  a  class.  In  course  of  time 
their  employers  were  astonished  at  the  change  in 


THE  SHOP  109 

attitude  that  came  over  them.  Misinformed,  self- 
seeking,  unscrupulous  leaders  began  to  lose  influence. 
The  other  class  of  leaders  came  to  the  front,  skilled 
in  negotiation,  competent  in  pleadings  and  cross- 
examinations  before  the  trade  boards,  efficient  and 
firm  in  organizing,  in  leading  and  disciplining  the 
unruly  among  the  workers.  They  have  been  learning 
democracy  and  due  process  of  law. 

And  the  employers  confess  that  they  too  have 
learned.  They  had  resented  interference  and  limita- 
tion of  their  authority.  They  wanted  unrestricted 
liberty.  The  machinery  of  consultation  and  dis- 
cussion was  vexatious.  On  innumerable  occasions 
they  had  to  change  their  plans  and  policies  against 
their  will. 

But  they  learned  that  it  was  worth  while  to  be 
protected  against  themselves;  that  they  needed  to 
make  it  impossible  to  violate  or  overlook  the  rights 
of  their  employees.  Especially  they  learned  to  ap- 
prove of  checks  calculated  to  restrain  then-  agents 
from  arbitrary  and  unjust  acts  toward  fellow-em- 
ployees. In  short,  what  they  think  they  have  learned 
is  that,  by  admitting  labor  into  the  councils  and 
authority  of  the  company,  they  are  winning  industrial 
peace  and  the  goodwill  of  labor.1 

This  is,  indeed,  a  hard  thing  to  learn  for  the  business 
man  and  engineer  who  has  been  accustomed  to  depend 
upon  his  own  judgment.  The  things  that  workers 
deem  important  often  seem  so  petty  to  him,  who  is 
accustomed  to  large  dealings,  that  to  be  compelled 
to  listen  to  their  grievances  is  wholly  vexatious. 

1  The  Hart,  Shaffner  and  Marx  Labor  Agreement,  pamphlet  published 
by  the  company,  Chicago,  1916. 


110  INDUSTRIAL  GOODWILL 

I  knew  a  highly  competent  specialist  in  office  and 
factory  management.  He  made  a  thorough  investi- 
gation of  the  arrangement  of  desks  and  the  routing 
of  papers  among  the  clerks  in  the  offices  of  a  certain 
large  establishment,  and  then  proceeded  to  rearrange 
the  floor  plan.  The  clerks  came  in  to  work  one  morn- 
ing and  found  their  desks  shifted  about.  The  man 
next  to  a  good  window  was  set  over  in  a  different 
corner.  Another  had  his  place.  Instead  of  increasing 
the  efficiency  of  that  office  the  specialist  had  succeeded 
only  in  reducing  it.  He  had  not  investigated  all 
of  the  facts.  He  had  thoroughly  investigated  the 
mechanical  efficiency  and  the  floor  plan,  but  had  not 
investigated  the  goodwill  of  the  clerks.  To  him,  the 
protests  of  an  individual  clerk  who  lost  his  good  win- 
dow were  but  a  petty  grouch. 

But  that  clerk  was  part  of  a  going  concern.  A  code 
of  procedure  and  a  line  of  promotion  had  grown  up 
in  that  office.  To  all  of  the  clerks  it  was  nearly  as 
important  to  be  promoted  along  the  line  from  dark 
corners  to  good  windows  as  to  be  promoted  in  salary 
or  authority.  They  had  learned  to  look  forward  to 
that  promotion.  Their  devotion  to  present  work  had 
been  built  up  largely  on  that  expectancy.  The 
goodwill  of  the  whole  office  force  had  grown  up  on 
that  floor  plan.  The  specialist  had  investigated 
the  floor  plan  but  not  the  collective  goodwill  that  went 
with  it. 

And  how  could  he  have  investigated  that  goodwill 
except  by  collective  negotiation  with  the  entire  force? 
If  he  accidentally  heard  the  protest  of  one  or  two  he 
might  very  well  turn  it  down  as  a  petty  and  selfish 
grouch.  But  had  he  consulted  them  all  together 


777 K  SHOP  111 

through  their  committee  freely  chosen  among  them- 
selves, he  would  have  found  that  the  grouch  of  one 
was  the  concern  of  all.  His  scientific  floor  plan  might 
have  been  delayed,  would  certainly  have  been  changed, 
but  in  dozens  of  details  he  might  have  contrived 
to  fit  his  expert  judgment  of  mechanical  efficiency 
into  an  equally  expert  judgment  of  spiritual  effi- 
ciency. The  one  might  be  his  own  private  judgment— 
the  other  his  share  in  a  collective  judgment. 

I  do  not  know  that  this  machinery  of  collective 
democracy  can  be  successfully  imposed  by  law  where 
the  employer  or  manager  is  unwilling.  But  willing- 
ness can  be  educated.  Legislation  is  a  crude  and 
impersonal  method  of  education.  Willingness  is  a 
personal  and  every-day  attitude  of  mind  that  sees 
the  need  and  then  does  things  before  being  compelled 
to  do  them.  Often,  however,  willingness  is  preceded 
by  a  jolt.  The  present-day  jolt  is  the  freedom  and 
unrest  of  labor.  No  capitalist  more  powerful  has 
lived  in  America  than  John  D.  Rockefeller.  While 
the  Colorado  Fuel  and  Iron  Company,  with  the  aid 
of  the  state  government,  was  successfully  resisting 
and  overcoming  the  strike  of  the  greatest  labor 
organization  in  the  country,  the  management  called 
to  their  aid  a  leading  authority  on  collective  shop 
organization.  They  adopted  and  installed  substan- 
tially all  of  the  machinery  of  representative  democracy 
above  described  that  would  have  been  adopted 
had  the  union  been  successful.  The  employees  of 
each  mining  camp  elect  by  secret  ballot  their  repre- 
sentatives to  act  on  their  behalf  in  all  matters  per- 
taining to  safety,  health,  housing,  recreation,  educa- 
tion, wages,  hiring  and  firing.  Rules  of  procedure, 


112  INDUSTRIAL  GOODWILL 

appeals  from  decisions  of  lower  boards  to  higher 
boards— substantially  all  of  the  arrangements  described 
above  for  a  different  establishment  were  adopted.  In 
order  to  guarantee  good  faith,  the  State  Industrial 
Commission  of  Colorado  is  made  the  highest  board 
of  appeal  in  case  of  dispute  between  the  company  and 
the  employees.  The  rules  protect  the  right  of  em- 
ployees to  organize  by  prohibiting  any  discrimination 
either  by  the  company  or  its  employees  on  account 
of  membership  or  non-membership  in  any  society, 
fraternity,  or  union.1  After  the  apparently  success- 
ful operation  of  this  plan  for  a  period  of  two  years, 
the  Rockefeller  interests  proceeded  to  install  it  in 
their  refineries  and  properties  elsewhere.2 

The  Rockefeller  plan  was  adopted  voluntarily,  that 
is,  without  recognition  of  organized  labor.  In  this 
respect  it  is  paternalistic  rather  than  democratic. 
It  is  handed  down  rather  than  forced  up.  One  of  the 
penalties  of  democracy  is  the  cost  of  learning  by 
experience.  And  the  history  of  democracy,  whether 
in  politics  or  industry,  has  been  a  history  of  costly 
experience  in  self-government. 

Perhaps  this  is  a  necessary  cost  and  inevitable. 
Many  labor  leaders  think  it  is.  They  prefer  complete 
defeat  and  no  organization  at  all,  to  a  paternalistic 
union  organized  by  the  employer.  In  some  respects, 
this  attitude  is  like  that  of  revolutionary  socialism. 
It  is  better  to  let  conditions  get  as  bad  as  possible 
because  only  then  is  revolution  attractive  to  the 
oppressed.  Bolshevistic  socialism  is  generally  found 

1  Of.  Industrial  Representation  Plan,  published  by  Colorado  Fuel 
and  Iron  Company,  Denver,  Colorado  (1915). 

2  See  Survey,  April  13,  1918. 


THE  SHOP  113 

in  accord  with  reactionary  capitalism,  both  of  them 
standing  firmly  on  their  ultimate  principles  and  natu- 
ral rights,  and  both  of  them  preventing  the  gradual 
introduction  of  democracy  through  half-way  measures. 
The  outcome  is  necessarily  revolution  and  counter- 
revolution, revolt  and  reaction. 

So  with  the  history  of  labor  organization.  It  has 
often  been  a  long  history  of  cycles  of  strikes  and  de- 
feat, labor  dictatorship  alternating  with  employer 
dictatorship.  But  constitutional  democracy  in  poli- 
tics and  industry  has  generally  been  procured  by 
half-way  measures.  It  may  have  its  revolts,  but 
generally  they  are  anticipated  by  concessions  in 
advance.  The  advance  may  not  be  great,  but  it 
stands,  and  is  a  starting  point  for  a  new  advance. 
And  this,  because  democracy  must  be  built  on  edu- 
cation, good  faith  and  goodwill.  Education  in  self- 
government  is  slow.  Good  faith  is  experience  of 
previous  good  faith.  Goodwill  is  reciprocity.  There 
is  no  conclusive  reason  why  constitutional  democracy 
may  not  start  with  the  employer  as  with  the  employees. 
It  depends  on  his  good  faith  and  goodwill.  If  he 
starts  it  as  a  subterfuge  he  is  probably  laying  up 
trouble  for  himself  and  for  others.  If  he  starts  it 
and  continues  it  with  recognition  that  as  fast  as  pos- 
sible the  workers  shall  learn  to  govern  themselves 
and  to  govern  the  shop  in  cooperation  with  himself,1 
then  he  is  truly  performing  a  public  service  for  a 
nation  which  has  admitted  to  its  suffrage  millions  of 
voters  unaccustomed  to  democracy. 

Organization,  whether  it  begins  with  the  workers 
or  with  the  employers,  must  always  begin  at  the 

1See  Filene,  E.  A.,   "Why  the  Employees  Run  Our  Business," 
System,  December,  1918. 
8 


114  INDUSTRIAL  GOODWILL 

bottom,  in  the  shop,  rather  than  at  the  top  by  legisla- 
tion or  national  organizations  of  capital  and  labor. 
The  national  organizations  of  labor  in  England  and 
America  began  in  the  earlier  days  as  shop  unions. 
Then  these  shop  unions  came  together  as  local  unions 
in  a  town  or  district.  It  was  not  until  railway  trans- 
portation had  brought  shops  and  towns  into  competi- 
tion that  national  unions  arose  in  order  to  equalize 
competitive  conditions.  At  first,  the  national  control 
was  weak.  The  national  conventions  were  assemblies 
of  delegates  from  local  sovereign  unions.  Gradually 
the  national  union  was  granted  increasing  powers.  It 
took  away  from  local  unions  their  control  over  finances 
and  strikes.  Then,  in  turn,  it  organized  new  local 
unions,  financed  them,  and  conducted  their  strikes  and 
negotiations. 

But,  in  all  this  cycle  of  shop,  district,  nation,  and 
back  to  district  and  shop,  it  is  the  shop,  after  all, 
that  constitutes  the  real  unit  of  organization.  It 
may  be  effaced  for  a  time;  the  local  or  district  union 
may  dominate;  control  may  be  centralized  at  a  dis- 
tance, but  it  is  in  the  shop  that  employer  and  employee 
meet  every  day.  It  is  there  that  trouble  begins  and 
there  that  the  real  business  of  collective  action  goes 
on.  The  national  organization  is  the  agent  of  the 
shop  organizations. 

And,  in  the  newly  awakened  spirit  of  collective 
action,  the  employer,  like  the  union,  begins  with  his 
own  shop.  If  employers  organize  on  a  national  scale 
to  contend  with  unionism,  unions  must  parallel 
then*  organization.  If  employers  devote  their  atten- 
tion to  the  real  business  of  unionism,  they  attend  to  it 
each  in  his  own  shop.  It  is  here  that  their  initiative, 


THE  SHOP  115 

originality,  enterprise,  personality,  count.  If  they 
subject  themselves  to  the  dictates  of  a  national  asso- 
ciation of  employers  they  are  likely  to  lose  the  chance 
to  outrun  their  competitors  in  the  new  race  for  collect- 
ive goodwill. 

They  may  be  compelled  to  submit  to  a  national 
association  of  employers.  That  is  one  thing.  But 
if  they  voluntarily  submit  to  others  then  they  abdicate 
the  control  of  their  own  business  at  the  very  point 
where  modern  business  is  most  delicately  in  the  balance. 
Under  the  old  system  of  competition  and  unregulated 
supply  and  demand,  they  might  distance  their  com- 
petitors by  cutting  wages  and  driving  labor,  and,  to 
protect  themselves  against  the  results  of  these  prac- 
tices they  were  often  forced  to  join  with  their  fellow- 
employers  on  a  national  scale.  Under  the  new  im- 
pulse of  competitive  goodwill,  they  naturally  wish  to 
be  free  from  the  control  of  the  national  labor  unions. 
They  cannot  be  free  from  that  control  if  they  submit 
to  the  control  in  their  own  shops  of  a  national  associa- 
tion of  employers. 

This  is  not  saying  that  national  associations,  either 
of  employers  or  of  unions,  have  no  place  in  the  awaken- 
ing new  spirit  of  collective  action.  They  have  a 
place,  but  it  is  different.  Their  new  place  is  more 
professional  and  educational,  and  less  executive  and 
governmental.  It  is  the  place  for  comparing  notes 
and  statistics,  sharing  experiences,  telling  each  other 
of  their  successes  and  showing  how  it  is  done  in  deal- 
ing with  labor.  It  is  less  and  less  the  place  for 
depriving  the  employer  of  his  freedom  to  deal  with  his 
own  employees  in  his  own  shop.  Employers'  associa- 
tions will  and  must  expand,  but  they  should  become 


116  INDUSTRIAL  GOODWILL 

great  educational  conferences  on  the  methods,  the 
purpose  and  the  spirit  of  shop  organization,  rather 
than  law-making  bodies  for  their  members.1 

Likewise  with  national  organizations  of  labor  unions. 
The  unparalleled  solidity  and  executive  power  of 
the  national  unions  in  America,  compared  with 
organized  labor  in  other  countries,  can  be  traced  to 
the  hostility  of  American  employers  and  courts. 
With  state  protective  legislation  declared  unconsti- 
tutional and  with  militant  employers'  associations, 
the  natural  line  of  development  has  been  toward 
centralization  of  power  in  the  hands  of  the  national 
officers  of  a  hundred  or  more  national  unions.2 

Yet,  while  this  very  centralization  was  going  on  in 
the  different  unions,  a  great  educational  conference, 
with  very  little  executive  or  legislative  power  over 
the  constituent  unions,  has  been  enlarging  its  field. 
The  authority  of  the  American  Federation  of  Labor 
is  neither  in  its  meagre  financial  power,  nor  in  its 
control  of  strikes,  but  in  its  so-called  " moral"  assist- 
ance and  its  educational  and  professional  conferences 

1  Possibly  a  beginning  in  this  direction  has  been  made  in  the 
National  Industrial  Conference  Board,  with  its  headquarters  in  Bos- 
ton. See  its  publications  on:  Workmen's  Compensation  Acts  in  the 
United  States—The  Legal  Phase,  April,  1917;  Analysis  of  British  War- 
time Reports  on  Hours  of  Work  as  Related  to  Output  and  Fatigue,  Novem- 
ber, 1917;  Strikes  in  American  Industry  in  Wartime,  March,  1918; 
Hours  of  Work  as  Related  to  Output  and  Health  of  Workers— Cotton 
Manufacturing,  March,  1918;  The  Canadian  Industrial  Disputes  In- 
vestigation Act,  April,  1918;  Sickness  Insurance  or  Sickness  Prevention? 
May,  1918 ;  Hours  of  Work  as  Related  to  Output  and  Health  of  Workers- 
Boot  and  Shoe  Industry,  June,  1918;  Wartime  Employment  of  Women 
in  the  Metal  Trades,  July,  1918;  Wartime  Changes  in  Cost  of  Living, 
October,  1918. 

a  Cf .  Commons  and  Associates,  History  of  Labor  in  the  United  States, 
I,  15;  11,42  ff. 


THE  SHOP  117 

of  leaders  and  representatives  from  the  constituent 
bodies.  It  is  here  that  labor's  policies  are  formulated, 
here  the  public  opinion  of  labor  is  crystallized,  and 
elsewhere  these  policies  and  opinions  are  adopted 
and  executed  in  the  shops. 

Naturally  enough  it  was  this  great  educational 
conference  of  labor  unions  and  the  somewhat  similar 
National  Industrial  Conference  Board  of  employers' 
associations  which  were  called  upon  by  President 
Wilson  to  create  the  National  War  Labor  Board.1 

For  it  was  the  crisis  of  war  that  gave  national 
importance  both  to  the  educational  work  of  the 
national  organizations  of  capital  and  labor  and  to  the 
daily  and  hourly  activities  in  the  shops.  The  war 
weakened,  at  least  for  a  time,  the  executive  and 
legislative  control  of  the  national  labor  unions  over 
the  shop  unions,  for  it  took  away  from  national 
unions  the  right  to  authorize,  finance  and  support 
strikes. 

In  England  this  was  done  by  legislation  which  made 
it  a  legal  offense  to  interfere  with  production.2  In 
America  it  was  no  less  effectively  done  by  the  vol- 
untary consent  of  the  national  leaders. 

Yet  while  law  or  public  opinion  can  reach  the  small 
number  of  national  leaders,  or  can  tie  up  the  funds  of 
the  unions,  it  cannot  reach  the  hundreds  and  thou- 
sands who  go  out  spontaneously  in  a  mass  on  strike. 
Illegal  or  unauthorized  local  strikes  in  England 
forced  the  government  to  waive  the  penalties  of  the 

I8ee  Documents  of  National  War  Labor  Board;  Proclamation  by 
the  President  of  the  United  States  (April  8,  1918);  Official  Bulletin, 
April  10,  1918,  p.  3. 

1  Munitions  of  War  Act,  July  2,  1915;  Defence  of  the  Realm  Act, 
AugiiBt  8,  1914;  August  28,  1914;  November  27,  1914. 


118  INDUSTRIAL  GOODWILL 

law,  to  go  over  the  heads  of  the  national  leaders, 
and  to  negotiate  directly  with  the  strikers.  It 
could  not  even  enforce  legal  penalties  on  the  local 
leaders,  for  that  but  shifted  the  demands  of  the 
strike  from  the  correction  of  shop  grievances  to  the 
release  of  the  leaders.  These  leaders  were  simply 
the  " works  committees"  or  the  "shop  stewards" 
so-called,  selected  from  among  the  workers  by  their 
fellow-workers,  to  represent  them  in  negotiations 
with  employers.  Protected  by  this  immunity  the 
shop  committees,  rather  than  the  national  unions, 
became  the  spokesmen  of  unrest,  and  the  main  result 
of  legislation  prohibiting  strikes  was  to  shift  negotia- 
tions from  headquarters  into  the  shops.  Compulsion 
failed,  and  the  government  after  two  and  a  half 
years'  experiment  with  compulsory  methods,  pro- 
ceeded to  recommend  and  introduce  more  nearly 
voluntary  methods  into  the  shops  and  localities. 
Since  the  object  was  to  prevent  shop  friction  rather 
than  to  remedy  it  after  it  became  acute,  the  govern- 
ment not  only  recognized  the  "works  committee" 
system  where  organized  labor  had  already  installed 
it,  but  extended  it  to  factories  where  there  was  no 
trade-union  organization.  Hence  by  pressure  and 
recommendation  rather  than  legal  penalties,  the  shops 
of  England  have  become  organized  more  or  less  into 
joint  committees  of  employers  and  employees  for 
the  purpose  of  dealing  with  their  shop  problems. 
The  details  of  these  organizations  are  widely  differ- 
ent, according  to  previous  conditions,  but  the  under- 
lying principle  is  the  freedom  of  employees  in  each 
shop  to  be  represented  collectively  by  committees 
of  their  own  choosing,  and  the  duty  of  their  employers 


THE  SHOP  119 

to  deal  collectively  with  these  committees  in  their 
own  shops.  National  or  district  organization,  so- 
called  " joint  standing  industrial  councils,"  represent- 
ing national  unions  if  such  existed,  were  recommended 
for  the  purpose  of  agreeing  on  standards  that  might 
equalize  conditions,  but  these  standards  were  to  be 
only  recommendations  to  the  several  "  works  com- 
mittees."1 

In  America  a  similar  policy  was  adopted  after  the 
first  year  of  war,  but  without  the  intervening  experi- 
ment of  legislation  prohibiting  strikes.  The  National 
War  Labor  Board,  representing  in  equal  numbers  the 
American  Federation  of  Labor  and  the  National 
Industrial  Conference  Board,  issued  its  statement  of 
policy  to  be  followed  whenever  called  upon  to  decide 
a  dispute.  This  policy  asserted  the  right  of  both 
workers  and  employers  to  organize  in  trade  unions  and 
associations  and  to  bargain  collectively  through 
chosen  representatives;  and  it  prohibited  either  side 
from  discriminations  or  coercion  in  the  maintenance 
of  the  right  to  organize. 

Instead,  however,  of  providing  for  joint  standing 
industrial  councils  in  the  several  industries,  as  was 
done  in  England,  the  National  War  Labor  Board 

1  First  Whitley  Report,  Interim  Report  on  Joint  Standing  Industrial 
Councils,  March  8,  1917,  Cd.  8606;  Second  Whitley  Report,  Second 
Report  on  Joint  Standing  Industrial  Councils,  October  18,  1917,  Cd. 
9002;  Third  Report,  Supplementary  Report  on  Works  Committees, 
October  18,  1917,  Cd.  9001;  Fourth  Report,  Industrial  Reports,  Num- 
ber 2,  March,  1918;  Fifth  Report,  Fifth  and  Final  Report  of  the  Whitley 
Committee,  September  18,  1918.  See  also  Monthly  Revieio,  Bureau  of 
Labor  Statistics,  September,  1917,  pp.  130-132;  October,  1917,  pp. 
33-38;  March,  1918.  pp.  81-84;  May,  1918,  pp.  59-61;  June,  1918, 
pp.  27,  28;  August,  1918,  pp.  76-79,  80,  81-84,  237-240;  September, 
1918,  pp.  53-58. 


120  INDUSTRIAL  GOODWILL 

reserved  to  itself  a  direct  appeal  from  each  shop,  and 
the  appointment  of  its  own  members  or  agents  to 
take  evidence  where  an  appeal  was  made.  The 
provisions  against  discriminations  and  the  appeals  to 
the  outside  board,  render  the  system  substantially 
the  same  in  its  principles  as  those  already  described 
in  the  early  pages  of  this  chapter.1 

During  the  war  a  certain  degree  of  compulsion 
gave  sanction  to  these  policies  and  decisions  of  the 
National  War  Labor  Board,  for  the  President  was 
given  authority  to  take  over  the  property  of  an  em- 
ployer as  well  as  to  make  rules  for  drafting  workers 
into  the  army  or  assigning  them  to  industries  through 
the  federal  employment  offices.  His  prompt  use  of 
this  authority  where  the  decisions  of  the  National 
War  Labor  Board  were  disregarded,  added,  of  course, 
an  indirect  compulsion  to  their  decisions.  Even  so, 
it  is  doubtful  whether  it  has  been  his  threat  of  com- 
pulsion or  his  appeal  to  patriotism  that  has  prevented 
strikes. 

In  the  face  of  necessary  long  delays  in  reaching 
decisions  by  the  National  Board  the  enduring  success 
of  the  Board  must  turn  on  the  successful  working  of 
the  shop  committees  and  shop  organizations.  These 
cannot  always  be  expected  to  agree,  and  some  pro- 
vision for  appeal  must  be  made.  It  gets  back  again 

1  See  documents  of  the  National  War  Labor  Board,  1918,  as  follows: 
Proclamation  by  the  President  of  the  United  States  (April  8,  1918); 
Functions,  Powers  and  Duties  of  the  Board;  Principles  and  Policies  to 
Govern  Relations  Between  Workers  and  Employers;  Method  of  Presenting 
Complaints  and  Procedure  of  Board.  Also  Official  Bulletin,  April  10, 
1918,  p.  3. 

1  Official  Bulletin,  June  4,  1918,  p.  6;  September  4,  1918,  p.  8;  Sep- 
tember 18,  1918,  p.  1.  Docket  132,  National  War  Labor  Board; 
Docket  273,  National  War  Labor  Board. 


THE  SHOP  121 

to  the  spirit  of  democracy.  Superior  authority,  for 
a  time,  may  install  and  impose  the  machinery  of 
democracy,  but,  if  the  spirit  is  lacking  the  machinery 
clogs.  And  in  time  of  peace,  even  the  machinery 
cannot  be  imposed  on  a  large  scale  without  conse- 
quences more  serious  in  other  directions.1 

The  shop-committee  system  has  been  installed,  and 
may  be  installed  by  employers  as  a  mere  subterfuge, 
designed  to  ward  off  a  real  shop  organization  by  con- 
trolling the  elections  of  its  committees,  by  mixing 
unorganized  with  organized  workers,  by  preventing 
the  employment  of  trade  unionists.  The  committee 
may  have  only  a  nominal  existence  and  its  recom- 
mendations be  disregarded  by  the  management.  It 
may  be  permitted  to  deal  only  with  social  and  ath- 
letic activities.  It  may  go  further  and  deal  with 
accident  and  sickness  prevention,  mutual  benefits 
and  insurance.  These  are,  indeed,  important  and  a 
necessary  beginning.  They  deal  with  non-controver- 
sial questions,  where  there  is  no  ultimate  clash  of 
interests,  since  the  disputes  arise  over  methods  to  be 
adopted  for  reaching  an  object  already  agreed  upon. 
The  critical  question  is  whether  they  are  permitted 
to  go  forward  into  the  truly  bargaining  activities  which 
decide  the  ultimate  clash  of  interests — whether  they 
take  part  in  fixing  wage  and  piece-rates,  time  and  speed 
standards,  apprenticeship  and  training,  introduction  of 
new  processes,  substitutions,  transfers  and  promotions, 
the  execution  of  standards  nationally  agreed  upon. 
On  these  points  is  the  test. 

Probably  in  no  shop  should  a  single  committee  deal 
with  these  several  kinds  of  industrial  problems. 

*  Below,  Chapter  XVI,  Depression. 


122  INDUSTRIAL  GOODWILL 

Social  clubs  and  athletics  are  one  thing;  safety, 
sickness  benefits  and  insurance  are  another;  wages, 
output,  discipline,  are  a  third  and  very  different. 
The  qualities  and  training,  and  above  all  the  person- 
ality needed  for  one  are  different  from  those  needed 
in  the  other.1  And  the  suitable  personality  on  the 
part  of  the  employer's  representatives  is  just  as  diffi- 
cult to  obtain  as  it  is  on  the  part  of  the  workers' 
representatives. 

The  machinery  which  I  have  described  at  the  be- 
ginning of  this  chapter  could  not  have  been  developed 
were  it  not  that,  back  of  it,  on  the  part  of  the  employ- 
er's representatives,  was  the  patience,  the  self-control, 
the  ability  to  listen  to  error  as  well  as  reason,  the 
willingness  to  submit  to  rules  regularly  adopted  even 
though  vexatious  and  mistaken,  in  short,  the  person- 
ality that  constitutes  the  spirit  of  reasonableness. 

And  we  know  that  organized  labor  is  as  likely  to 
be  arbitrary  as  the  employer  if  it  has  the  power,  and 
its  spokesmen  can  be  as  ingenious  and  plausible  in 
justifying  it.  In  the  name  of  democracy  labor  may 
be  as  despotic  as  capital  in  the  name  of  liberty. 

Democracy  is  conservative.  At  all  times  in  the 
world's  history  the  less  privileged  classes  appeal 
instinctively  to  custom  as  their  protection  against 
arbitrary  power.  Whatever  is  customary  is  familiar 
and  safe.  Innovation  is  a  menace,  a  threat,  a  hard- 
ship. The  laborer  instinctively  opposes  machinery. 
When  I  told  a  cotton-mill  operative  that  an  auto- 
matic loom  had  been  invented  by  which  one  weaver 

1  An  interesting  analysis  of  these  different  problems  and  corre- 
sponding committees  is  made  by  C.  G.  Renold,  Manchester,  England, 
reprinted  in  America  by  the  Survey,  Supplement,  October  5,  1918. 


THE  SHOP  123 

could  operate  twenty-four  looms,  he  promptly  said 
the  inventor  ought  to  be  shot. 

Liberty  is  progressive.  It  breaks  down  custom. 
How  shall  the  two  be  brought  together?  Capital 
has  had  its  nineteenth  century  of  unrestricted  liberty. 
It  has  broken  down  custom.  Must  it  break  down 
democracy  because  democracy  is  conservative? 

The  labor  unions  of  the  country  secured  legislation 
by  Congress  which  prevents  the  government  arsenals 
and  navy  yards  from  employing  any  methods  of  time 
and  motion  studies,  of  stop-watch  or  measuring 
devices  designed  to  ascertain  the  speed  at  which  the 
laborer  can  work.1  Certain  unions  seem  to  have 
made  it  an  unnegotiable  demand  in  their  proposed 
agreements  with  employers.  This  is  the  obstructive 
answer  of  organized  labor  to  the  unrestricted  liberty 
of  capital. 

But  accurate  methods  of  measurement  are  as  neces- 
sary for  industrial  democracy  as  they  are  for  the 
progress  of  industry.  Before  the  " trade  board"  ma- 
chinery, described  at  the  beginning  of  this  chapter, 
was  in  working  order,  the  piece-rates  were  made  by 
the  foreman.  He  made  and  unmade  the  rates  and 
changed  them  at  will.  After  three  or  four  years' 
experience  the  following  regulation  was  evolved: 

"  Whenever  a  change  of  piece-rate  is  contemplated  the  matter 
shall  be  referred  to  a  specially  appointed  rate  committee  who 
shall  fix  the  rate  according  to  the  change  of  work.  If  the  com- 
mittee disagree  the  Trade  Board  shall  fix  the  rate.  In  fixing 
the  rates,  the  Board  is  restricted  to  the  following  rule: 

"  Changed  rates  must  correspond  to  the  changed  work  and 
new  rates  must  be  based  upon  old  rates  where  possible." 

1  United  States  Statutes  At  Large,  Vol.  39,  Part  I,  64th  Cong.  I 
Sess.  (1916),  Ch.  417;  64th  Cong.  II  Sess.  (1917),  Ch.  180. 


124  INDUSTRIAL  GOODWILL 

In  practice  it  works  out  as  follows:  The  two 
representatives  on  the  Trade  Board  constitute  them- 
selves a  committee  of  time-and-motion  study  experts 
in  order  to  fix  the  prices  of  work.  These  work  to- 
gether with  their  stop-watch,  if  needed,  to  ascertain 
and  agree  upon  the  time  required  to  make  the  new 
piece,  and  to  calculate  the  corresponding  piece-rate 
required  to  make  the  standard  wage.  Of  course, 
they  do  not  stand  over  the  workers  and  make  time 
studies  of  all  workers  while  at  work.  The  study  is 
made  of  selected  workers  in  an  experimental  labora- 
tory, and  is  made,  not  to  speed  up  the  workers,  but 
to  agree  on  a  piece-rate.  The  decision  is  made  by 
the  neutral  chairman,  and  the  new  rates  are  always 
provisional  and  temporary. 

Thus  does  the  machinery  of  shop  committees 
adjust  itself  to  the  scientific  study  of  efficiency. 
The  notion  is  dispelled  that  a  stop-watch  is  scientific 
only  when  placed  in  the  hands  of  a  disinterested  out- 
sider. There  are  dozens  of  factors  that  cannot  be 
measured  by  a  watch.  The  selection  of  the  operative 
whose  motions  are  timed  is  a  matter  of  opinion  as  to 
whether  he  is  representative  of  the  general  run  of  work- 
ers. Whether  he  pulls  out  or  holds  back  is  a  matter 
of  opinion.  Whether  he  encumbers  himself  with 
wasteful  motions  is  largely  a  matter  of  opinion.  On 
these  and  other  points  opinions  differ.  And  the 
workers  are  just  as  much  concerned  as  the  manage- 
ment to  have  the  measurements  accurate.  For  their 
wages  and  speed  depend  upon  it.  Where  opinions 
differ  there  can  be  no  accuracy,  in  the  mechanical 
sense,  but  there  may  be  conciliation  and  a  working 
agreement.  It  all  depends  on  that  spirit  of  democracy 


THE  SHOP  125 

which  is  patience  and  willingness  to  listen  and  act 
according  to  that  due  process  of  law  wherein  all  the 
facts  are  considered  and  due  weight  is  given  to  each. 
And  this  depends  just  as  much  on  labor's  reasonable- 
ness as  on  employers'  reasonableness. 

Thus  shop  organization  is  the  focus  of  all  problems 
of  employment.  Politics,  legislation,  national  associa- 
tions of  capital  and  labor,  all  else  are  outside  and  over- 
head. They  affect  the  shop  somewhat,  but  it  is 
the  shop  conditions  and  the  attitude  in  the  shops 
of  the  nation  that  tell  what  the  nation  shall  be.  There 
is  where,  more  than  ever  before,  the  nation's  life  is 
maintained  in  war  and  peace.  In  the  first  year  of 
the  world's  war  Germany  fired  five  or  six  explosive 
shells  to  every  one  fired  by  England  and  France. 
In  the  last  year  of  the  war  England  and  France  fired 
five  or  six  to  Germany's  one.  When  the  American 
boys  stopped  the  Germans  at  the  Marne  it  was 
because  ammunition  flowed  to  them  like  a  river. 
It  was  shop  organization  that  won  the  war.  Capital 
and  labor,  for  the  time,  laid  down  their  industrial 
war  and  united  in  the  shop  as  Allies.  The  lesson  of 
war  is  the  lesson  for  peace.  Since  the  war  is  won 
shall  the  shops  return  to  war?  Rather  shall  they 
not  make  more  perfect  that  willingness  to  listen, 
that  patience  with  the  faults  of  others,  that  procedure 
that  consults  first  and  acts  afterward,  which  con- 
stitutes the  spirit  and  substance  of  democracy? 
And  shall  they  not,  in  peace  as  in  war,  combine 
loyalty  to  the  nation  with  loyalty  to  each  other? 


XIII 
EDUCATION 

In  Pittsburgh  I  found  the  minimum  value  of  the 
English  language  was  2  cents  an  hour.  Non- 
English-speaking  immigrants  were  getting  15^  cents 
an  hour,  and  English-speaking  immigrants  doing 
similar  work  were  getting  17J^  cents  an  hour. 

Of  the  9,500,000  young  men  registered  for  the 
first  selective  draft,  1,200,000  were  citizens  of  foreign 
countries  and  could  not  be  required  to  serve  in  the 
American  armies.1  Working  side  by  side  in  our 
factories  and  on  our  farms,  8,000,000  American  citi- 
zens could  be  drafted  to  offer  their  lives  in  behalf  of 
the  prosperity  and  high  wages  of  1,000,000  privileged 
immigrants  free  to  remain  at  work. 

The  state  of  Arizona  enacted  a  law  to  the  effect 
that  employers  in  that  state  should  employ  at  least 
80  per  cent  of  their  force  who  were  citizens  and  only 
20  per  cent  who  were  not  citizens.  The  Supreme 
Court  of  the  United  States  declared  the  law  uncon- 
stitutional on  the  ground  that  every  person  in  America, 
citizen  or  alien,  has  a  right  to  work  in  American 
industries.2 

Such  is  the  outcome  of  a  theory  that  goes  back  to 
the  Declaration  of  Independence  and  asserts  the 

1  Report  of  the  Provost  Marshal  General  to  the  Secretary  of  War,  on 
the  First  Draft  under  the  Selective-Service  Act,  1917  (1918),  pp.  53-56, 
86,  87. 

»  Truax  v.  Raich,  239  U,  S.  33  (1915). 

126 


EDUCATION  127 

natural  and  inalienable  rights  of  man,  without  assert- 
ing the  accompanying  principle  that  every  right  has 
its  reciprocal  duty.  The  immigrant  has  a  natural 
right  to  work  and  the  employer  has  a  natural  right  to 
employ  him,  but  the  immigrant  has  no  reciprocal 
duty  to  serve  the  nation  that  gives  him  liberty  and 
the  employer  no  reciprocal  duty  to  educate  or 
Americanize  him. 

Thirty  years  ago  the  state  of  Wisconsin  placed  on 
its  statute  books  a  law  requiring  private  and  parochial 
schools  to  give  a  minimum  amount  of  instruction 
in  the  English  language  and  to  be  subject  to  the 
inspection  of  the  State  Superintendent  of  Schools  simi- 
lar to  that  of  public  schools.1  On  the  plea  of  liberty 
and  freedom  of  worship  the  law  was  soon  repealed, 
and  those  who  sought  freedom  in  America  have  been 
free  of  this  particular  duty  to  become  American. 

The  eighteenth  and  nineteenth  centuries  were  cen- 
turies of  struggle  against  autocracy  and  slavery. 
The  theory  of  natural  and  inalienable  rights  of  man 
served  its  purpose  in  the  French  and  American 
Revolutions  and  the  American  Civil  War.  Kings 
and  slaves  disappeared. 

But  the  results  were  negative.  The  twentieth 
century  will  determine  the  kind  of  democracy  or 
even  autocracy  that  will  take  the  place  of  the  old. 
A  theory  of  reciprocal  and  inalienable  duties  of  man 
is  needed  to  determine  positively  the  results  of  the 
World  War. 

The  employer  who  hires  immigrant  labor  is  hiring 
cheap  labor  with  low  standards  of  living  and  ignorance 
of  self-government.  They  are  one  of  his  weapons 

1  Wisconsin  Statutes,  1889,  Chapter  519. 


128  INDUSTRIAL  GOODWILL 

to  restrain  American  labor  from  obtaining  high  wages 
and  supporting  a  high  standard  of  living.  The 
immigrant  who  works  eight  hours  a  day  and  earns 
two  or  three  times  as  much  as  he  earned  in  Europe 
for  twelve  hours,  is  reaping  the  harvest  of  liberty 
and  plenty  which  American  labor  and  American  democ- 
racy have  won  for  him. 

The  employer,  or  immigrant,  or  justice  of  a  Supreme 
Court,  who  fails  to  look  for  any  reciprocal  duty 
attaching  to  this  enjoyment  of  power,  liberty  and 
prosperity,  is  living  in  the  past  and  fighting  an  autoc- 
racy that  has  ceased  to  exist.  The  new  autocracy 
that  is  arising  on  the  ruins  of  the  old  is  economic 
rather  than  political,  and  it  arises  because  it  asserts 
rights  of  liberty  and  property  that  have  already  been 
won,  and  evades  duties  to  the  democracy  that  has  won 
them. 

Duties  subtract  from  rights.  It  costs  something  to 
fulfill  duties.  How  heavy  the  duties  shall  be  made  in 
consideration  of  the  rights  is  a  matter  of  good  judg- 
ment under  the  circumstances,  of  willingness  to  do 
one's  share,  of  patriotism.  In  ordinary  business  the 
law  of  demand  and  supply  compels  the  employer  to 
pay  producers  the  full  cost  of  getting  out  the  raw 
material  which  he  buys.  The  price  that  he  pays  for 
coal,  iron,  lumber,  wheat,  cotton,  covers  not  only  the 
cost  of  furnishing  the  material  but  also  the  cost 
of  depreciation,  the  costs  of  risks,  the  cost  of  keeping 
up  the  fertility  of  the  soil,  or  the  cost  of  developing 
additional  sources  of  raw  material  to  take  the  place 
of  that  which  is  being  depleted.  He  pays  for  conser- 
vation of  the  resources  from  which  his  raw  material 


EDUCATION  129 

is  derived,  else  the  supply  would  not  continue  to  be 
forthcoming. 

Somebody  must  pay  for  the  conservation  of  the 
nation's  human  resources.  If  left  to  demand  and 
supply,  the  most  valuable  resources  are  not  conserved. 
For  labor  is  both  the  source  of  demand  for  products 
and  the  source  of  supply  of  the  same  products.  A 
nation  of  sick,  ignorant,  or  rebellious  workers  produces 
enough  products  to  keep  them  sick,  ignorant,  and 
unpatriotic.  Demand-and-supply  goes  in  a  circle 
when  the  thing  demanded  is  the  supply  of  health, 
intelligence  and  the  qualities  of  citizenship. 

We  have  learned  to  compel  parents  to  send  their 
children  to  school  and  to  compel  tax-payers  to  pay 
for  their  schooling,  even  though  the  parent  has  no 
desire  for  it  and  the  tax-payer  no  children.  It  is 
their  duty  to  set  aside  the  law  of  demand  and  supply 
of  school  teachers. 

We  have  learned  somewhat  to  enforce  the  duty  of 
taking  care  of  health  where  the  menace  is  contagious 
or  infectious,  and  the  duty  of  tax-payers  to  pay  the 
bills  even  though  they  do  not  demand  the  services  of 
physicians,  nurses  and  hospitals  for  others  beside 
themselves. 

We  have  been  thinking  somewhat  of  the  duties  of 
citizenship  and  have  seen  the  injustice  of  compelling 
some  to  offer  their  lives  for  the  good  of  others  who 
claim  allegiance  to  other  nations,  or  no  nation. 
Duties  are  as  inalienable  as  rights.  The  problem 
of  democracy  is  how  to  distribute  duties  as  well  as 
rights. 

Employers  control  one-half  to  two-thirds  of  the 
working  hours  of  labor.  Without  this  control  they 


130  INDUSTRIAL  GOODWILL 

cannot  make  profits.  They  convert  the  nation's 
human  resources,  like  its  natural  resources,  into 
products,  and  meanwhile  they  take  their  share. 

These  human  resources  come  to  them  after  a  heavy 
investment.  The  parents  have  invested  something. 
The  tax-payers  and  the  schools  have  invested  some- 
thing. Many  children  and  youths  have  been  lost 
on  the  way  but  not  charged  off.  The  nation  invests 
several  hundred — possibly  several  thousand — dollars, 
unaccounted  for  and  uncredited  in  every  worker  who 
reaches  the  age  of  production.  And  many  workers 
come  from  foreign  lands  where  much  less  has  been 
invested  in  bringing  them  up. 

The  employer  of  immigrant  labor  is  paying  less 
than  the  full  cost  of  production  of  American  labor. 
And  the  immigrant  laborer  is  getting  excess  profits 
on  the  investment  that  has  been  put  into  him. 

That  the  employer  should  be  required  to  send  the 
immigrant  to  school  and  the  immigrant  be  required 
to  attend  school  in  the  day  time  on  the  employer's 
time  is  but  a  duty  that  each  may  justly  owe  to  the 
preservation  of  the  nation  that  enriches  them  both. 

That  the  immigrant  should  become  American  and 
that  his  employer  should  give  thought  and  money  and 
leadership  to  bring  to  him  an  understanding  and  love 
of  America  is  but  a  small  compensation  for  what 
America  does  for  them. 

And  no  person  is  in  such  an  advantageous  position 
as  the  employer.  He  controls  the  immigrant's  time 
and  livelihood;  he  sets  the  example  by  which  the  immi- 
grant gets  an  idea  of  what  American  democracy  means. 
How  baffling  was  the  experience  of  a  member  of  the 
American  Labor  Mission  sent  to  Europe  to  win  the 


EDUCATION  131 

workers  away  from  the  socialist  propaganda  of 
Germany,  when  he  was  met  by  the  retort  of  returned 
Italian  workers  that  America  had  ruined  their  health 
and  exploited  their  labor. 

Like  other  duties  the  duty  of  education  cannot  in 
fairness  be  borne  by  individual  employers  unless 
their  competitors  carry  a  similar  burden.  If  one 
employer  teaches  English  to  his  immigrants  and 
others  do  not,  the  others  bid  up  the  price  and  the 
public-spirited  one  loses  his  investment.  The  asso- 
ciated employers  of  Detroit,  Cleveland,  and  other 
cities  have  begun  to  bring  pressure  on  their  fellow 
employers  to  teach  English.  I  knew  a  corporation 
that  started  a  school  for  apprentices.  After  spending 
considerable  money  on  their  education,  as  soon  as 
the  apprentices  reached  the  point  where  they  could 
return  something  on  the  investment,  and  even  before 
their  education  was  completed,  other  employers 
began  to  steal  them  by  offering  higher  wages. 

American  industry  needs  schools  for  apprentices. 
These  schools  must  be  in  the  shops  and  the  apprentices 
must  get  a  living  wage  while  learning.  When  the 
tax-payers  set  up  separate  trade  schools,  only  a  very 
few  boys  are  financially  able  to  attend,  and  they  are 
trained  for  only  the  small  number  of  trades  that 
have  not  yet  been  broken  up  by  machinery.  The 
state  of  Wisconsin  attempts  to  get  all  employers  to 
take  on  apprentices,  by  enforcing  apprenticeship 
contracts,  so  that  the  boy  may  get  an  all-round  tram- 
ing,  may  be  paid  while  learning,  and  be  prevented 
from  leaving  before  his  training  is  finished.  But 
the  contracts  themselves  are  voluntary.  No  employer 
is  compelled  to  take  apprentices  and  no  boy  or  parent 


132  INDUSTRIAL  GOODWILL 

is  compelled  to  sign  a  contract.  Furthermore,  public 
opinion  does  not  seem  to  support  prosecutions  for 
enforcement  of  the  contracts  although  the  law  imposes 
penalties  on  the  employer  for  violations  and  on  the 
boy  for  running  away.1  The  law  is  advantageous 
but  not  universal.  Like  the  separate  trade  school 
it  is  limited  by  the  small  number  of  employers  and 
the  small  number  of  trades.  Consequently,  it  merges 
into  the  continuation  school,  which  is  universal 
apprenticeship. 

About  two-thirds  of  the  boys  and  girls  who  enter 
school  drop  out  at  the  end  of  the  compulsory  attend- 
ance period,  and  nine-tenths  of  them  drop  out  before 
completing  the  four-year  high  school. 2  Then:  industrial 
education  then  begins.  The  employer  is  their  school 
master.  For  many  of  them,  attendance  is  compul- 
sory, for  they  must  earn  a  living  for  themselves  and 
parents.  The  employer  is  conducting  a  compulsory 
private  school  for  the  nation's  future  workers.  His 
fees  are  the  profits  he  can  make  on  the  work  of  his 
pupils.  His  school  is  as  important  as  the  public  schools 
in  the  scheme  of  compulsory  education.  In  the  public 
schools,  the  child  does  not  and  should  not  learn  to 
be  a  worker.  Then  is  the  time  for  play.  Yet  to 
learn  to  work  and  to  be  interested  in  work  is  the  sure 
foundation  for  advancement  and  citizenship. 

Unfortunately,  the  employers  generally  have  ac- 
quired a  bad  reputation  in  the  conduct  of  their  schools. 
They  have  been  notorious  in  defending  their  right 
to  the  fees  and  avoiding  their  duty  to  furnish  the 

1  Wisconsin  Laws  (1915),  Chapter  133,  Section  2377. 
a  Inglis,  Alexander,  Principles  of  Secondary  Education  (1918),  p. 
126. 


EDUCATION  133 

education.  For  a  hundred  years  in  Europe  and 
America  they  have  resisted  efforts  to  take  away  from 
them  their  power  over  the  child.  Even  employers 
who  know  better  and  who  strive  to  be  models  in  their 
own  establishments  have  been  found  to  line  them- 
selves up  with  competitors  whose  reputation  is  bad.  In 
this  respect  even  the  best  of  them  have  earned  the 
stigma  of  acting  together  as  a  class  against  the  public 
interest,  instead  of  endeavoring  to  lift  their  competi- 
tors to  the  higher  level  of  meeting  their  obligations. 

And  so,  when  it  comes  to  the  continuation  schools, 
and  the  nation  proceeds  positively  to  require  employ- 
ers to  devote  five,  six,  or  eight  hours  a  week  to  the 
education  of  their  pupils  as  workers,  many  people 
are  loath  to  trust  them  with  even  a  voice  in  the  man- 
agement of  their  schools.  And  this  is  true,  notwith- 
standing the  cordial  and  sincere  endorsement  of  the 
compulsory  part-time  schools  by  leaders  among  the 
manufacturers.1 

Yet,  who  is  there  more  fitted  by  his  own  training 
and  daily  experience  to  have  a  voice  in  the  manage- 
ment of  these  schools?  The  employers,  or  at  least 
their  managers,  have  come  up  through  the  shop. 
They  have  learned  by  hard  knocks  just  those  little 

1  National  Association  of  Manufacturers:  "We  favor  the  establish- 
ment in  every  community  of  continuation  schools  wherein  the  children 
of  fourteen  to  eighteen  years  of  age,  now  in  the  industries,  shall  be 
instructed  in  the  science  and  art  of  their  respective  industries  and  in 
citizenship."  "  It  is  the  right  of  every  one  of  these  children  to  be  given 
an  education  that  will  make  him  efficient  and  reasonably  happy,  able 
properly  to  maintain  himself  and  meet  the  various  obligations  of  life 
and  citizenship."  "A  nation  cannot  live  half  slave  and  half  free, 
half  educated  and  half  uneducated.  God  help  the  man  whose  vision 
is  not  clear  enough  to  see  that  the  employers  see  this."  Proceedings 
of  Annual  Conventions,  1911;  1912,  p.  150;  1913,  p.  238. 


134  INDUSTRIAL  GOODWILL 

turning  points  that  are  met  every  day  and  lead  to 
success  or  failure.  They  are  in  daily  contact  with 
wage-earners  and  they  know  the  qualities  that  get 
the  workers  their  promotions  and  the  qualities  that 
keep  them  back. 

The  school  teacher  in  the  public  schools  or  the 
high  schools,  or  colleges  or  universities,  cannot  really 
know  these  details  that  fit  the  workers  for  promotion 
in  industry.  They  can  teach  what  they  know  but 
not  what  they  do  not  know.  When  they  are  in  con- 
trol of  industrial  education  they  run  it  into  arts,  or 
crafts,  or  manual  training,  or  mechanical  exercises, 
or  something  that  does  not  connect  up  with  the  shop 
as  it  actually  is  in  modern  industry. 

Yet  they  stand  for  what  employers  as  a  class  do 
not  stand  for.  They  stand  for  education  and  citi- 
zenship, and  not  for  the  fees  and  profits.  No  wonder 
that  in  the  distrust  of  employers  the  school  teacher  is 
listened  to  and  often  is  given  control  where  he  is  not 
fitted  to  control. 

And  especially  is  the  wage-earner  bewildered  by 
this  clash  of  school  teacher  and  employer  for  control. 
He  knows  that  the  school  teacher  does  not  fit  his 
children  into  industry  and  he  distrusts  the  employers,1 

1  American  Federation  of  Labor:  "If  we  permit  the  present  aca- 
demic educational  group  of  the  nation  to  dominate,  the  whole  force 
and  virtue  of  genuine  vocational  trade  training  will  be  in  danger  of 
being  lost  sight  of  and  the  nation's  appropriations  will  probably  be 
misdirected  along  minor  lines  of  endeavor,  such  as  manual  training, 
amateur  mechanics  and  other  trifling,  impractical  valueless  schemes. 
Neither  can  we  afford  to  permit  this  great  measure  to  be  over-weighted 
by  any  special  trade,  commercial  or  vocational  interests.  The  agri- 
culturists should  not  predominate,  neither  should  the  commercial  or 
even  the  labor  and  industrial  interests."  Report  of  Proceedings,  1916, 
p.  103. 


EDUCATION  135 

particularly  in  these  days  when  the  educator  can 
invoke  the  dread  of  " prussianizing "  and  "commercial- 
izing" the  continuation  schools.1 

Undoubtedly,  the  idea  of  compulsory  part-time 
school  is  German  in  its  origin.  It  was  first  adopted  by 
imperial  legislation  more  than  twenty  years  ago.2 
But  it  may  be  made  American  in  its  management. 
If  the  employers  alone  are  in  control,  it  might  be 
"commercialized."  If  the  school  teacher  alone  con- 
trols, it  loses  contact  with  the  shop.  If  the  wage- 
earner  alone  controls,  it  might  be  used  to  restrict 
apprenticeship.  Joint  control  is  democratic  control. 
It  enlists  the  qualities  of  each  that  are  needed,  and 
checks  the  defects  of  each. 

The  Federal  Vocational  Education  Law  of  1917 
attempts  to  establish  this  joint  control.8  It  attempts 
to  give  representation  to  the  employer,  the  educator, 
the  wage-earner.  It  attempts  to  secure  similar 
joint  control  in  the  states  and  in  the  local  continuation 

l"What  do  I  mean  by  Prussianizing  our  education?  I  mean 
primarily  this:  (1)  a  subtle,  even  if  unconscious,  attempt  to  use  the 
children  of  the  laboring  people,  including  farmers,  as  cogs  in  a  machine; 
an  attempt  to  follow  the  lead  of  the  caste  system  in  Germany,  a  system 
which  defrauds  children  of  an  opportunity  for  secondary  education 
and  practically  dooms  nine-tenths  of  the  people  to  be  and  to  remain 
hewers  of  wood  and  drawers  of  water;  (2)  a  division  of  the  school  sys- 
tem into  two  parts,  each  striving  for  financial  support  and  developing 
rivalries  of  a  pernicious  kind.  It  should  be  noted  that  in  Prussia 
there  is  no  rivalry  between  the  two  systems,  for  everybody  who  count* 
concedes  that  when  the  children  of  the  common  people  finish  the  com- 
mon school  there  is  nothing  more  for  them  but  toil  and  the  army." 
Superintendent  of  Public  Instruction,  Wisconsin.  Educational  Newt 
Bulletin,  November  1,  1918,  p.  3. 

1  Hoffman,  Die  Gewerbe-Ordnung,  Section  120. 

«  Smith-Hughes  Act,  approved  February  23,  1917.  See  Vocational 
Summary,  published  monthly  by  Federal  Board  for  Vocational  Edu- 
cation, beginning  May,  1918. 


136  INDUSTRIAL  GOODWILL 

schools.  It  attempts  to  eliminate  autocracy,  either 
of  employers,  pedagogues,  or  wage-earners.  It  at- 
tempts to  secure  representative  democracy  in  educa- 
tion. If  this  scheme  of  representative  control  suc- 
ceeds, how  great  are  its  possibilities!  It  is  universal, 
industrial,  educational. 

The  public  grade  schools  give  universal  education, 
but  not  industrial,  and  they  should  not.  Theirs  is 
the  all-round  preparation  for  any  and  every  position. 
It  is  play,  not  work.  But  education  cannot  stop  at 
fourteen,  or  sixteen,  or  even  twenty-one  years  of  age. 
If  it  stops,  then  there  is  no  future,  for  the  future  is 
advancement,  and  advancement  stops  when  learning 
stops.  The  high  school,  the  college,  the  university, 
the  technical  school,  leads  on  to  certain  specialized 
professions,  increasing  in  number  but  always  limited, 
for  they  are  not  self-supporting.  They  feed  on 
industry  and  thrive  only  as  industry  thrives.  It  is  in 
agriculture,  manufactures,  transportation,  merchan- 
dizing, business,  that  the  nation  lives  and  the  millions 
find  promotion.  To  open  up  the  lines  of  advance- 
ment in  industry  according  to  the  aptitudes  and 
abilities  of  every  individual  is  the  aim  of  industrial 
democracy.  The  trade  school  cannot  do  it.  The 
apprenticeship  school  cannot  do  it.  They  are  limited 
to  the  skilled  trades.  The  public  schools  cannot  do  it. 
They  are  not  industrial.  Only  universal  apprentice- 
ship can  do  it,  where  the  common  laborer,  the 
unskilled  worker,  the  immigrant  and  the  children  of 
the  entire  nation  shall  have  equal  opportunities  in 
both  education  and  industry. 

And  universal  apprenticeship  is  but  the  compulsory 
continuation  or  part-time  school.  It  may  be  four, 


EDUCATION  137 

eight,  or  more  hours  a  week,  or  even  half-time, 
according  as  experience  and  good  judgment  advise.  It 
may  extend  to  the  age  of  sixteen,  then  to  eighteen, 
according  as  the  instruction  is  found  practicable  and 
the  teachers  competent.  It  may  extend  still  further 
for  immigrants  who  have  not  learned  the  English 
language. 

To  be  universal  it  must  be  compulsory,  in  the  day 
time  and  on  the  employer's  time.  The  tired  worker 
in  night  school  is  not  a  learner.  Attendance  there  is 
neither  compulsory,  universal,  nor  fruitful.  Only 
on  the  employer's  time,  when  the  learner  must 
attend  in  order  to  earn  his  living,  can  attendance 
be  universal  and  instruction  educational. 

The  first  great  awakening  of  England  aroused  by 
the  war  is  this  union  of  education  and  industry.  No 
nation  ever  suffered  more  from  the  exploitation  of 
children  in  factories.  And  England  led  the  world 
in  excluding  young  children  from  factories.  But 
education  stopped  where  industry  began.  Two-fifths 
of  the  boys  and  girls  between  the  ages  of  twelve  and 
sixteen  receive  no  further  education  after  the  age  of 
thirteen.  " These  figures,"  said  a  group  of  British 
employers  and  trade  unionists,  "make  it  easy  to  under- 
stand the  superior  success  of  Germany  in  so  many 
departments  of  activity.  That  success  ...  is  due 
to  the  fact  that  so  very  much  greater  a  proportion 
of  young  people  in  that  country  receive  any  systematic 
education  at  all  during  the  all-important  years 
between  fourteen  and  eighteen."1  On  the  strength  of 

1  Memorandum  on  the  Industrial  Situation  after  the  War,  Carton 
Poundation,  Section  97  (1917).  Reprint  by  United  States  Shipping 
Board,  Emergency  Fleet  Corporation  (1918). 


138  INDUSTRIAL  GOODWILL 

these  facts  the  British  Parliament  enacted  the  law 
of  August,  1918,  looking  toward  the  continuation 
school. 

In  America,  conditions  are  similar.  Probably  a 
million  boys  and  girls  leave  school  annually  from 
grades  above  the  sixth  grade,  and  nine-tenths  of  the 
total  number  of  children  enter  various  occupations 
before  eighteen  years  of  age. 1  The  Vocational  Educa- 
tion Law  of  1917  is  America's  awakening  to  this  gap 
between  industry  and  education. 

Rights  have  their  reciprocal  duties.  Duties,  in 
the  long  run,  are  duties  to  the  nation  that  grants  and 
protects  the  rights.  But  duties  cannot  be  left  to 
autocrats  or  bureaucrats,  or  to  a  single  class  to  impose 
on  other  classes.  Germany  set  the  example  of 
enforcing  duties  on  employers  and  parents  to  provide 
universal  education.  If  Germany's  system  is  faulty 
it  is  not  on  account  of  the  recognition  of  universal 
duties  but  on  account  of  autocratic  or  bureaucratic 
control  in  enforcing  the  duties.  A  wrong  direction 
may  be  given  to  a  good  thing.  Chemistry  acts 
much  the  same  in  Germany  as  in  America,  but  the 
German  government  may  use  it  for  different  purposes. 
Modern  industry  is  no  respecter  of  nations,  and  the 
psychology  of  boys  and  girls  is  about  the  same  in 
Europe  as  hi  America.  But  one  nation  may  direct 
it  toward  conquest  or  obedience  or  the  supremacy 
of  one  class  over  other  classes;  another  nation  may 
direct  it  toward  democracy  and  equal  opportunity 
for  advancement  to  every  person  in  every  class.  It 
depends  on  the  control. 

1  Inglis,  Alexander,  Principles  of  Secondary  Education  (1918),  pp. 
575,  676. 


EDUCATION  139 

No  class  can  be  trusted  to  decide  for  itself.  No 
class,  either  aristocrats,  capitalists,  educators  or  work- 
ers, can  see  the  needs,  or  rights,  or  duties,  of  others 
as  vividly  as  its  own.  Democracy  in  education,  like 
democracy  in  politics  or  industry,  is  not  a  philosophy 
or  a  theory  or  even  a  " science"  of  education — it  is 
joint  control  over  the  teachers. 

The  modern  advanced  philosophy  of  education  is 
fully  awake  to  the  vocational  needs  of  education. 
It  is  fully  aware  that  these  needs  cannot  be  met 
while  teachers  adhere  to  their  "  traditional  ideals  of 
culture,  traditional  subjects  of  study  and  traditional 
methods  of  teaching  and  discipline."1  But  these 
advanced  ideas  are  not  and  cannot  be  generally  put 
into  practice  while  school  teachers  remain  in  bureau- 
cratic control;  for,  like  other  experts,  if  uncontrolled 
they  followed  the  traditions  of  bureaucracy  rather 
than  the  science  of  education.  When  the  teachers 
are  jointly  controlled,  when  organized  teachers, 
organized  employers  and  organized  labor  have  each 
an  equal  voice  in  the  control,  when  democracy  in 
education  is  truly  representative  democracy,  then 
the  teachers  begin  to  see  the  connections  of  education 
and  industry,  and  to  modify  their  traditional  methods 
according  to  both  the  needs  of  industry  and  the  phil- 
osophy of  education. 

For  the  business  of  the  vocational  teacher  is  to 
make  industry  interesting.  Very  few  laborers  can 
reach  the  top.  On  this  account  some  people  despair 
of  ever  making  work  interesting.  They  feel  that, 

1  Dewey,  John,  Democracy  and  Education  (1915),  p.  114.  See  also 
Ingiis,  Alexander,  Principles  of  Secondary  Education  (1918),  pp.  572- 
620;  Miller,  H.  L.,  "Adequate  Schooling  for  the  Youth  of  the  Nation," 
Inter-Mountain  Educator,  September,  October,  1918. 


140  INDUSTRIAL  GOODWILL 

since  the  workers  are  compelled  to  settle  down  in 
grooves,  industry  can  have  no  meaning  or  incentive 
for  them.  If  this  conclusion  is  true,  then  the  situation 
is  hopeless.  For,  as  far  as  we  can  see,  the  forces  of 
steam,  electricity,  transportation,  are  driving  indus- 
try into  large  concerns.  Twenty  thousand  men  in 
one  factory  can  make  automobiles  cheaper  than  one 
thousand.  Room  at  the  top  is  lessening  and  the 
number  of  workers  tied  into  grooves  is  increasing. 

The  outlook  is  menacing  for  the  worker,  for  industry, 
for  the  nation.  The  workers  lose  their  interest  in 
industry  just  at  the  time  when  they  become  more 
powerful  than  ever  before  in  controlling  industry 
through  labor  organization  or  politics.  Without 
interest  in  their  work  they  cannot  be  expected  to  pay 
attention  or  have  a  care  for  the  economy,  efficiency, 
or  discipline,  without  which  business  goes  bankrupt. 

The  inventors,  the  engineers,  the  business  men,  have 
brought  on  this  situation.  They  have  mastered  the 
forces  of  nature  and  will  increase  their  mastery. 
They  have  converted  nature  into  capital  and  labor 
into  an  army.  The  problem  of  capital  is  the  physical 
sciences — chemistry,  electricity,  physics,  biology.  The 
problem  of  labor  is  the  human  science,  psychology.  If 
it  is  the  engineer  who  is  the  expert  in  physical  science, 
it  is  the  educator  who  becomes  expert  in  psychology. 
The  future  of  industry  is  psychological.  The  inventors, 
engineers,  business  men  of  the  future  will  be  industrial 
psychologists.  Industry  must  be  educational,  and 
it  is  this  very  problem  of  opening  up  lines  of  promotion 
where  physical  science  has  closed  them  that  is  the 
problem  of  industrial  education. 

For  interest  in  one's  work  does  not  depend  on  a 


EDUCATION  141 

remote  expectation  of  reaching  the  top.  It  is  the 
next  step  that  is  interesting.  The  next  step  means 
accomplishment,  means  overcoming  obstacles  that 
are  not  hopeless,  means  initiative,  means  thinking 
on  the  job.1  To  the  mere  "intellectual"  who  ponders 
over  the  labor  problem,  there  is  no  hope  if  there  is  no 
room  at  the  top.  Hence  efforts  to  interest  workers 
even  in  the  next  step  are  despaired  of.  To  the  busi- 
ness man  and  engineer  whose  opinions  are  formed  in 
mastering  the  physical  sciences,  the  worker  is  often 
preferred  who  does  not  think  or  talk  back.  But  to 
the  educator  it  is  these  very  qualities  which  others 
reject  that  are  his  problem  to  be  worked  out.  They 
are  the  psychological  problems  of  industry.  If  indus- 
try has  lessened  the  chances  of  promotion  it  is  the 
educator's  business  to  open  them  up  again.  He  must 
work  out  lines  of  advancement  that  may  serve  as  a 
substitute  at  least  for  the  lost  chances  of  promotion. 
He  must  know  how  to  suggest  these  lines  of  advance- 
ment to  the  employer  and  the  worker  and  to  work 
them  out  practically.  If  he  sees  workers  confined  to 
"enervating"  jobs  he  must  know  how  to  get  them 
"energized."2  And,  just  as  the  business  man  has 
employed  and  made  use  in  the  past  of  the  inventor  or 
engineer  who  reduces  the  physical  sciences  to  prac- 
tice, so  must  he  enlist  the  inventive  educator  in 
making  his  business  educational. 

1  Of.  Dewey,  John,  Democracy  and  Education,  pp.  146-162;  Marot, 
Helen,  Creative  Impulse  in  Industry  (1018);  Commons,  Labor  and 
Administration,  pp.  363-381. 

a  Cf .  Schneider,  Herman,  Report  on  Public  School  System,  New  York 
Board  of  Estimate  and  Apportionment,  1911-12,  Part  II,  pp.  765-773. 
Education  for  Industrial  Workers,  World  Book  Company  New  York, 
1915. 


142  INDUSTRIAL  GOODWILL 

Then  may  we  expect  that  industrial  education  will 
take  its  proper  place.  Schools  and  industry  will 
dove-tail.  Neither  employer,  laborer,  nor  educator 
will  dominate.  The  educator  will  come  out  from  his 
seclusion  and  will  become  industrial  without  being 
commercialized,  for  he  will  bring  to  industry  the 
science  of  psychology.  Business  will  become  educa- 
tional without  being  academic,  for  it  will  have  its 
daily  problems  of  education  which  cannot  wait  for 
a  remote  future.  And  labor  will  become  more  gener- 
ally interested  in  the  work,  in  addition  to  the  com- 
pensation. 


XIV 
LOYALTY 

Lack  of  interest  and  lack  of  loyalty  are  frequent 
complaints  respecting  the  modern  laborer.  The  com- 
plaint comes  from  different  sides.  Some  people  are 
hardened  to  it  and  expect  it.  With  them  lack  of 
interest  or  loyalty  is  a  kind  of  original  sin.  There 
is  no  remedy  for  it  except  to  lay  down  the  law  of 
hiring  and  firing,  with  its  penalty  of  unemployment. 

At  the  other  extreme  are  the  doctrinaire  socialists 
and  anarchists.  Man  is  born,  as  it  were,  with  an 
instinct  of  workmanship,  and  coercion  crushes  it  out 
of  him.  Abolish  private  property  with  its  right  to 
hire  and  fire  and  its  penalty  of  unemployment  and 
then  you  will  " liberate"  this  suppressed  instinct. 

One  extreme  provokes  the  other.  If  there  were 
only  the  theories  of  original  depravity  and  original 
perfectibility,  there  would  be  no  outcome  but  revolu- 
tion and  counter-revolution. 

The  problem  is  statistical.  The  wage  system  is 
compulsory,  but  it  is  also  persuasive.  It  rewards 
and  punishes.  We  could  hardly  expect  that  some 
kinds  of  work  or  some  kinds  of  employers  would  ever 
inspire  interest  or  loyalty;  or  that  some  kinds  of 
laborers  would  ever  get  interested  or  loyal.  The 
wage  system  with  them  is  compulsory  and  penal. 
Other  kinds  of  work  are  interesting,  other  employers 

143 


144  INDUSTRIAL  GOODWILL 

are  inspiring,  other  workers  improvable.  With  them 
the  wage  system  is  persuasive  and  energizing.  There 
are  as  many  possible  remedies  for  disloyalty  and 
indifference  as  there  are  differences  in  employers, 
workers  and  kinds  of  work. 

A  mediaeval  and  romantic  remedy  goes  back  to  the 
time  when  the  skilled  worker  did  all  parts  of  the  work 
and  made  a  finished  job  from  raw  material  to  artistic 
product.1 

But  how  small  was  the  number  of  skilled  workers 
compared  with  the  number  of  all  the  workers !  There 
is  probably  a  larger  proportion  of  highly  skilled 
workers  and  highly  interesting  work  in  modern  indus- 
try than  there  was  in  the  mediaeval  system,  if  we 
take  into  account  all  the  work  from  raw  material 
to  finished  product. 

Besides,  suppose  the  arts  and  crafts  movement 
should  succeed  and  should  enable  the  worker  again 
to  make  his  all-round  finished  product.  If  there 
were  very  many  of  them  they  would  need  to  sell 
their  products  in  distant  markets,  and  immediately 
the  factory  system  would  start  up  again  with  its 
artistic  designers,  its  division  of  labor  into  skilled, 
semi-skilled  and  unskilled,  its  big  employers,  its 
wholesalers,  jobbers,  and  distant  retailers. 

Or,  suppose  that  trade  unions  of  skilled  workers 
should  succeed,  as  some  have  done  for  a  time,  in 
preventing  specialization  and  subdivision  of  labor, 
in  order  that  they  might  retain  their  all-round  pro- 
ficiency. If  their  product  is  shipped  to  distant 
markets,  or  their  partly  finished  work  can  be  done 

1  Morris,  William,  Art  and  Socialism  (1884);  A  Dream  of  John  Ball 
(1888). 


LOYALTY 

near  the  source  of  raw  material,  then  factories  will 
start  up  and  eat  into  their  jurisdiction. 

Arts,  crafts,  and  unions,  in  time,  have  yielded  and 
must  yield  to  the  specialization  imposed  by  trans- 
portation and  large  establishments.  The  worker's 
interest  and  loyalty,  if  it  is  aroused,  must  be  his 
interest  in  a  joint  product  and  his  loyalty  to  a  going 
concern. 

A  certain  establishment  takes  its  younger  appli- 
cants for  employment  on  a  trip  throughout  the  plant 
before  setting  them  at  work  on  their  own  specialty. 
The  different  processes  are  pointed  out,  partly  ex- 
plained, and  the  finished  product  is  exhibited.  The 
systems  of  payment  are  explained,  the  chances  for 
promotion,  responsibility,  and  outlook  are  canvassed. 
Then  the  applicant  is  asked  to  come  back  the  next 
day,  after  talking  and  thinking  it  over.  If  hired, 
then  a  daily  follow-up  ensues  until  the  beginner  gets 
acquainted  with  the  work  and  with  other  workers 
and  feels  at  home.  Immediately,  in  that  establish- 
ment, after  starting  this  practice,  the  expensive 
turnover  of  the  first  week  or  month  of  employment 
and  its  resulting  breakage  of  material,  was  reduced  to 
almost  negligible  quantities.  Two  things  are  be- 
lieved to  be  accomplished.  A  narrow  specialized 
job  is  seen  as  an  essential  part  of  a  marvellous  system, 
and  the  fellow-workers  and  management  are  seen 
to  be  looking  for  steady  workers  and  good  companions. 
A  beginning  is  made  in  the  spirit  of  workmanship 
and  loyalty  to  the  business. 

In  another  establishment  a  school  is  started  for  all 
beginners.  At  first,  skilled  operatives  were  put  in  as 

teachers.     They  knew  how  to  do  the  work  but  not 
10 


146  INDUSTRIAL  GOODWILL 

how  to  teach  it.  They  did  the  work  themselves, 
told  the  beginner  to  look  on  and  then  imitate.  Even- 
tually a  school  teacher  was  employed,  and  the  skilled 
operatives  were  sent  back  to  their  machines.  The 
teacher  did  not  ask  the  beginners  to  look  on  and  imi- 
tate, but  asked  them  to  study  out  the  machine,  to 
study  their  own  motions,  to  study  the  whys  and 
purposes.  The  company  pays  them  wages  during 
this  period  of  studying.  A  beginning  is  made  in 
interest  and  loyalty — in  interest,  because  there  is 
something  to  think  about;  in  loyalty,  because  some- 
body has  given  them  a  little  taste  of  real  thinking 
and  mental  advancement.  That  establishment  has 
a  supply  of  competent  beginners  when  its  competitors 
are  short-handed. 

A  worker  on  repetition  work  was  telling  how  he 
kept  himself  from  going  crazy.  When  he  went  to 
work  in  the  morning  he  would  start  up  a  line  of 
imagination,  picturing  himself  perhaps  as  a  prince, 
going  through  a  day  of  romance,  adventure,  combat, 
heroism,  love;  or  a  line  of  reminiscence  going  over  the 
events  of  his  childhood  or  of  the  night  before.  He 
kept  his  mind  away  from  his  work. 

In  a  public  employment  office  I  found  that  a  large 
proportion  of  the  applicants  for  work  were  boys  or 
young  men  on  these  repetition  jobs  in  machine  shops. 
They  had  been  on  one  machine  for  a  month,  or  two 
months,  or  six  months,  and  just  wanted  a  change — 
a  different  machine  or  even  the  same  machine  in  a 
different  shop.  But  there  were  no  middle-aged  men  in 
this  class  of  applicants.  The  older  men  had  lost  their 
hankering  for  a  change,  had  gotten  used  to  monotony, 
or  had  quit  for  good. 


LOYALTY  147 

Repetition  work  must  be  done  by  somebody.  A 
foreman  told  me  he  wanted  fairly  stupid  peasant 
women  from  Europe  and  did  not  want  them  to  think. 
There  ought  to  be  a  place  in  industry  for  all  kinds  of 
people.  It  is  too  bad  that,  just  because  a  person  can- 
not think,  he  cannot  find  a  job.  But,  somehow,  when 
one  sees  how  ingenious,  inventive,  and  enterprising 
employers  are  at  all  points  where  they  can  make 
money  by  improvements,  one  cannot  help  wishing 
that  it  could  be  made  unprofitable  to  keep  any  worker 
on  this  kind  of  merely  repetition  work.  The  kind  of 
work  creates  its  own  supply  of  the  kind  of  labor  suited 
to  it.  Perhaps,  if  the  laborer's  minimum  wages  were 
materially  increased  or  his  hours  materially  shortened, 
employers  would  substitute  automatic  or  semi-auto- 
matic machinery.  A  worker  attending  a  dozen 
machines  has  far  more  interesting  work  than  one 
who  is  feeding  a  single  machine.  And  when  the  whole 
factory  gets  automatic  and  the  work  comes  along  on 
trolleys  and  conveyors,  a  thousand  men  and  boys 
strung  along  in  a  team  have  a  more  interesting  time 
than  the  same  number  working  by  themselves.  Their 
work  is,  indeed,  repetition  work,  and  each  one  adds  but 
his  own  little  specialized  motion  to  the  total,  but  it  is 
sociable  and  democratic.  Instead  of  a  few  skilled 
workers  each  making  an  all-round  product,  hundreds 
and  thousands  of  unskilled  get  into  the  game.  The 
great  automatic  modern  factory  has  probably  more 
chances  for  interesting  work  for  more  people  than 
ever  did  the  medieval  and  romantic  small  shop. 

Repetition  work  seems  to  be  a  transition  stage  from 
handwork  to  automatic  work.  The  automatic  ma- 
chine and  factory  may  cost  more  money  and  require 


148  INDUSTRIAL  GOODWILL 

a  larger  investment  and  a  larger  factory.  As  long  as 
wages  are  low  and  hours  long  it  may  be  cheaper  to 
keep  the  repetition  process.  When  wages  go  up 
and  hours  go  down  then  it  may  be  cheaper  to  bring 
in  the  more  nearly  automatic  process. 

Yet  it  would  be  foolish  to  suggest  any  one  panacea 
for  uninteresting  work.  How  to  make  work  inter- 
esting is  just  as  much  a  field  of  investigation  and 
experiment  as  how  to  invent  a  machine  or  lay  out  a 
plant.  And  business  men,  engineers,  and  educators, 
can  be  just  as  ingenious  and  successful  in  doing  it. 
It  is  the  big  field  of  industrial  psychology,  which  for 
the  twentieth  century  opens  up  like  the  nineteenth  for 
chemistry  and  physics. 

There  is  a  narrow  business  or  engineering  psychol- 
ogy which  overlooks  this  industrial  psychology.  It 
is  the  idea  that  the  only  interesting  thing  is  the  amount 
of  compensation  an  individual  can  get,  and  so,  by 
experimenting  and  measuring,  we  find  out  about  how 
much  bonus  or  premium  is  necessary  in  order  to  get 
him  to  do  his  best.  This  undoubtedly  will  work  for 
a  while,  and  will  work  for  some  individuals  more  than 
others,  and  for  the  young  more  than  the  old,  but  if  it 
is  too  stimulating  its  effects  are  like  intoxication. 
When  the  dream  is  over  the  awakening  is  sour. 

Industrial  psychology  is  more  temperate.  It  looks 
ahead  and  measures  the  after  effects.  It  sees  not 
only  a  lot  of  isolated  individuals,  each  hustling  for 
himself,  but  sees  the  whole  plant,  the  team  work, 
the  going  concern,  the  joint  product,  the  goodwill 
of  employer  and  fellow-workers.  And  industrial 
psychology  is  willing  to  take  some  chances  on  the 
outcome. 


LOYALTY  149 

Yes,  it  is  said,  a  big  and  rich  corporation  can  try 
experiments  and  take  big  chances ;  the  little  man  must 
play  safe.  But  look  about,  and  see  how  little  men 
become  big.  It  is  by  plunging  a  little  on  a  new  idea. 
The  new  idea  today  is  the  interest  and  loyalty  of 
workers.  They  are  free  and  organizing  as  never 
before.  Courts,  legislatures  and  governments  cannot 
be  depended  upon  as  in  the  past  to  coerce  them. 
The  business  man  with  the  new  idea  will  get  their 
interest  and  loyalty.  Some  will  fail,  others  will 
succeed.  But  the  chances  of  failure  are  probably 
greater  by  sticking  to  the  old  ideas  than  by  venturing 
on  the  new  ones. 

For  loyalty  today  is  not  the  loyalty  of  former  days. 
The  slave  was  loyal  because  he  could  not  quit.  The 
laborer  is  loyal  if  he  has  no  alternative  to  go  elsewhere. 
He  is  loyal  in  hard  times  and  disloyal  in  good  times. 

The  new  idea  of  loyalty  is  the  loyalty  of  those  to 
whom  unemployment  is  no  penalty.  The  law  of 
hiring  and  firing  has  no  coercion  for  them.  They 
can  find  another  job,  or  can  wait  until  they  find  it. 
The  new  loyalty  is  the  loyalty,  not  of  penalties,  but 
of  goodwill.  It  is  not  afraid  to  quit  or  be  fired,  but 
willingly  stays  and  works.  And  this  kind  of  loyalty 
is  not  an  inborn  instinct  of  workmanship,  but  must 
be  taught  and  drawn  out  by  education,  and  kept  up 
by  continuous  effort  on  the  part  of  the  employer. 
There  is  no  asset  so  fragile  as  goodwill.  The  least 
inattention  loses  the  customer.  A  year  or  two  of 
careless  attention  destroys  many  years  of  previous 
effort. 

In  hard  times,  when  workers  are  not  free  to  quit, 
no  attention  need  be  paid  to  the  cultivation  of  loyalty. 


150  INDUSTRIAL  GOODWILL 

The  coercive  penalty  is  enough.  But  it  is  at  that  very 
time  that  goodwill  is  won  or  lost.  The  disloyalty 
of  good  times  when  workers  are  free  to  quit,  has  been 
produced  by  inattention  to  goodwill  in  the  preceding 
hard  times.  The  employer  who  weeds  out  with  a 
club  in  hard  times  and  complains  of  disloyalty  and 
lack  of  interest  in  good  times,  has  not  yet  adapted 
himself  to  the  new  kind  of  loyalty  that  is  built  up, 
not  on  penalties,  but  on  freedom. 

Thus  education,  interesting  work  and  loyalty  go 
together.  Loyalty  is  not  gratitude  for  past  favors, 
nor  a  sense  of  obligation,  but  is  expectation  of  reci- 
procity. If  the  future  is  not  to  be  better  than  the 
past,  then  gratitude  loses  its  hold.  Education  is 
not  the  teaching  of  gratitude  or  obligation  for  favors 
received,  but  is  the  unfolding  of  possibilities  in  the 
job  and  the  worker.  It  is  this  that  makes  work 
interesting  and  converts  loyalty  into  goodwill. 


XV 
PERSONALITY 

In  the  old  romantic  days  the  employer  and  his 
journeyman  and  apprentice  lived  and  worked  together, 
much  as  the  small  farmer  does  now  with  his  hired 
help.  But  those  were  rather  miserable  days.  There 
is  nothing  very  romantic  either  for  the  hired  man  or 
the  farmer,  much  less  for  the  farmer's  wife.  It  is 
not  very  regrettable  that  industry  has  gotten  away 
from  that  personal  touch.  Long  hours,  compulsory 
association  with  each  other  out  of  working  hours 
are  not  conducive  to  personality. 

For  personality  is  a  kind  of  specialization.  You 
need  to  get  away.  You  need  a  little  time  for  yourself. 
You  need  to  be  different.  You  need  to  specialize. 
The  modern  corporation  has  more  chances  for  person- 
ality than  ever  were  known  before  in  industry.  And 
it  succeeds  for  that  reason.  If  it  has  no  monopoly 
it  succeeds  because  it  has  a  soul. 

Goodwill  is  the  soul;  and  goodwill  is  a  multiple  of 
all  the  different  personalities  that  keep  the  business 
agoing.  For  personality  is  not  mere  individuality. 
It  is  that  aspect  of  individuality  that  gets  results. 
And  specialization  is  not  mere  peculiarity.  It  is  thor- 
ough preparation  for  the  work  of  personality.  Per- 
sonality is  power.  It  gets  other  people  to  do  things. 
But  it  is  not  physical  or  economic  power.  You  do 
not  need  much  personality  if  you  use  a  club  or  can 

151 


152  INDUSTRIAL  GOODWILL 

keep  the  other  man  from  getting  a  living.  Person- 
ality is  psychological  power — the  power  of  persua- 
sion— the  power  to  get  across  with  free  men.  It  is 
the  child  of  liberty  and  democracy. 

The  modern  corporation  specializes  in  personality. 
And  it  specializes  in  the  directions  where  those  it 
deals  with  are  free  to  go  elsewhere.  One  kind  of  person- 
ality is  successful  in  dealing  with  bankers,  financiers, 
and  investors.  A  somewhat  similar  in  dealings 
with  wholesalers  and  other  manufacturers.  A  rather 
different  kind  is  sent  out  on  the  road  to  reach  the 
retailers.  The  auditors  and  accountants  have  their 
characteristic  qualities.  Lawyers  and  lobbyists  are 
selected  according  to  the  personalities  they  meet 
in  courts,  politics  and  legislatures.  The  engineers, 
superintendents,  and  foremen  are  selected  to  get 
out  product  and  buy  the  commodity  labor. 

More  recently,  as  labor  becomes  more  free  or  in- 
tractable, the  labor  psychologist  is  taken  on.  First, 
perhaps,  the  trade  unionist  who  knows  the  mind  of 
organized  labor  in  the  shop  and  in  union  meetings  and 
headquarters.  Then  a  variety  of  labor  specialists — 
nurses,  safety  experts,  health  experts,  welfare  workers, 
scientific  managers,  educators,  employment  managers, 
service  workers. 

Naturally,  these  begin  with  the  more  obvious 
physical  aspects  of  their  work.  The  employer  is 
inclined  at  first  to  be  disappointed  if  his  safety  expert 
is  not  a  mechanical  engineer.  He  thinks  of  safety 
in  terms  of  belts  and  set-screws. 

But  the  safety  expert  does  not  produce  safety,  he 
sells  it.  The  factory  may  be  mechanically  fool-proof. 
But  that  will  hardly  cut  out  more  than  one-third  or 


PERSONALITY  153 

one-half  of  the  accidents.  The  workingmen  must  buy 
safety.  It  costs  them  something  to  play  safe.  They 
must  keep  their  mind  on  it.  They  must  look  out. 
They  must  slow  up.  They  must  run  the  risk  of 
irritating  the  foreman  who  is  paid  for  output. 

So,  the  safety  expert  must  sell  safety  also  to  the 
foreman.  It  costs  the  foreman  more  than  it  does  the 
workman.  The  foreman  must  be  shown.  He  may 
not  be  able  to  see  the  pain  and  suffering.  He  has 
been  brought  up  on  accidents,  and  even  thinks  he  has 
no  accidents,  when  the  truth  is  that  he  did  not  notice 
them.  He  must  get  a  bigger  idea.  He  must  be  led 
to  see  that,  in  the  long  run,  safety  increases  the  out- 
put of  his  men  as  a  whole.  It  saves  time  and  absence 
and  turnover.  The  foreman  must  be  educated  to  see 
himself  as  a  going  concern  and  not  to  see  merely  the 
irritating  individual  who  plays  safe. 

To  sell  safety  to  the  foreman  it  must  be  sold  to  the 
employer.  It  costs  the  employer  more  than  it  does 
the  others.  The  smallest  cost  is  what  he  spends  in 
money  on  safe-guarding  machines  and  plant.  The 
largest  cost  is  interference  with  production.  He 
must  let  his  safety  expert  have  some  authority  over 
the  foreman  who  thinks  that  safety  reduces  out- 
put. He  must  let  him  get  the  workmen  together  in 
committees. 

Thus  the  safety  engineer  must  be  a  social  engineer. 
If  he  can  invent  and  educate  the  " safety  spirit" 
among  the  entire  force  from  top  to  bottom,  then  the 
workmen  and  foremen  will  invent  and  demand  and  use 
more  safety  devices  than  he  ever  could  think  out  and 
install  by  himself.  He  adds  his  personality  to  the 
going  concern.  He  gives  the  corporation  a  soul. 


154  INDUSTRIAL  GOODWILL 

And  the  nurse  and  doctor.  The  employer  at  first 
thinks  of  "first  aid,"  or  headaches,  or  fainting  spells, 
or  a  medicine  chest  and  cots  and  operating  tables. 
He  orders  his  nurse  not  to  go  out  into  the  shop  at  all. 
The  doctor  is  called  only  after  the  thing  happens. 

But  the  nurse  and  doctor  must  also  sell  health- 
first  to  the  workers.  They  quit  work,  lay-off,  or 
slow-up.  The  foreman  loses  their  output  and  that  is 
about  all  he  has  time  to  investigate.  The  nurse  and 
doctor  know  more.  The  workers  need  to  be  en- 
couraged to  complain  in  advance  of  serious  complaint. 
The  employer  needs  to  be  shown  the  value  of  health. 
How  far  the  nurse  and  doctor  will  be  able  to  go, 
whether  into  the  shop  or  even  into  the  homes,  is 
limited  by  their  personality.  One  may  offend  and  do 
harm.  Another  may  be  welcome.  A  mechanical 
expert  in  the  hospital  is  one  thing.  People  must 
come  in  extremity.  A  social  expert  who  can  carry 
the  spirit  of  good  health  to  the  entire  working  force 
is  something  additional.  The  one  may  make  the 
hospitals  and  beds  look  nice  in  photographs.  The 
other  gives  a  soul  to  the  corporation. 

And  so  on  down  the  line  of  all  the  possible  labor 
specialists.  The  great  aim  of  them  all  is  to  make  the 
work  interesting  and  the  workers  willing.  All  are 
educators. 

In  the  olden  time  the  apprentice  learned  a  trade  by 
imitating  the  journeyman.  When  once  learned  the 
trade  was  fixed  and  irrevocable.  But  modern  indus- 
try is  revolutionary.  It  breaks  up  the  trades  just 
because  it  is  based  on  underlying  principles  of  chemis- 
try, physics,  psychology,  which  have  thousands  of 
different  ways  of  working  out  in  practice.  The 


PERSONALITY  155 

routine  worker  who  only  can  imitate  is  left  behind. 
The  one  who  can  contrive  new  ways  of  doing  things 
that  will  work  gets  ahead. 

We  hear  much  of  a  "  suggestion  system. "  Workers 
are  encouraged  to  write  out  their  suggestions  for  im- 
provements and  send  them  in.  Not  many  are  real 
improvements,  perhaps,  but  whether  the  system  works 
or  not  depends  on  the  personality  that  conducts  it. 
If  a  worker  offers  a  suggestion  it  is  because  his  mind 
has  waked  up  a  little.  If  he  is  turned  down  without 
knowing  why  or  if  he  hears  nothing  of  it,  he  sinks  back 
in  a  rut.  If  he  gets  a  hearing  or  a  voice  in  the  decision, 
and  learns  why  one  suggestion  is  an  improvement 
and  another  is  not,  then  the  system  may  accomplish 
the  object,  not  mainly  of  getting  a  few  improvements, 
but  of  getting  the  workers  interested  in  the  business. 

The  busy  foreman  or  superintendent  cannot  spend 
much  time  on  fruitless  ideas.  His  job  is  output  of 
product.  What  is  wanted  is  output  of  ideas.  It 
begins  with  the  education  of  the  beginner.  When 
the  boy  or  girl  enters  the  shop  he  is  full  of  questions, 
of  untried  ideas,  of  suggestions.  If  he  is  simply 
"broken  in,"  so  as  to  become  productive  as  soon  as 
possible,  his  questioning  is  suppressed.  If  he  tries 
out  his  ideas  he  learns  to  select  those  that  work  and 
the  reasons  for  rejecting  the  others.  Then  when  he 
passes  out  from  the  " vestibule  school"  he  is  still  a 
questioner.  He  comes  back  to  that  school  to  try 
out  his  ideas.  The  vestibule  school  becomes  a  gradu- 
ate school.  His  education  never  is  finished  as  long 
as  he  has  a  question  or  an  untried  idea. 

A  new  labor  department  is  thus  created — the 
educational  department.  A  new  specialist  is  called 


156  INDUSTRIAL  GOODWILL 

for — the  teacher.  Not  the  hand-me-down  teacher 
who  passes  on  the  traditions  of  the  trade  or  shop,  but 
the  dig-it-up  teacher  who  is  an  investigator  along  with 
every  worker,  old  or  young,  who  has  a  question  or  a 
suggestion.  A  new  personality  is  called  for,  not  the 
foreman  who  can  get  out  product,  but  the  teacher 
who  can  get  out  ideas. 

The  factory  has  its  scientific  laboratory  for  a  select 
number  of  chemists  or  engineers,  with  their  tests, 
experiments  and  installation  of  new  devices.  Every 
factory  can  have  its  educational  department  for  all 
the  workers  who  have  questions  and  new  ideas.  But, 
if  so,  it  all  depends  on  the  personality  of  the  teacher. 

A  humdrum,  routine  teacher,  who  does  it  all  him- 
self, and  demands  imitation  and  repetition,  is  not  a 
teacher.  The  one  who  can  provoke  ideas,  raise 
doubts,  stimulate  ambitions,  and  then  let  the  others 
do  it  themselves,  he  is  the  teacher.  And  he,  too,  may 
impart  a  soul  to  the  corporation — the  soul  of  hope, 
personality,  individuality,  self-reliance,  in  the  workers 
because  their  work  is  interesting,  promising  and  unfin- 
ished. He,  too,  may  impart  the  loyalty  that  is  goodwill 
—the  loyalty  that  gladly  sees  then*  own  progress  in  the 
progress  and  prosperity  of  the  business.  Here  is  the 
true  science  of  scientific  management. 

It  is  the  defect  of  every  new  idea  that  it  gets  stand- 
ardized for  the  sake  of  those  who  do  not  understand 
it.  Strong  personalities  have  pioneered  the  move- 
ment for  scientific  management.  They  have  under- 
stood human  nature.  They  have  come  up  through 
the  shop  and  have  been  a  part  of  the  psychology  of 
labor.  They  have  known  how  to  invent  and  sell 
efficiency  to  the  worker.  But  when  the  movement 


PERSONALITY  157 

spreads  and  large  contracts  are  taken,  smaller  men 
are  put  into  the  shop  with  their  instruments  of 
measurement  and  their  statistics  and  blue  prints. 
Hoxie  found  that  the  mass  of  time-study  men  in  the 
shops  who  actually  set  the  tasks  and  make  the  piece 
and  premium  rates  are  "  poorly  paid  and  not  men  of 
an  intellectual  or  moral  quality  and  breadth  of  train- 
ing and  education"  calculated  to  inspire  confidence. 
There  are  exceptional  individuals  at  the  top,  but  for 
the  staff  that  does  the  actual  work  the  details  are 
reduced  to  mechanical  routine  without  a  grasp  of 
the  social  effects  or  labor  problems  that  ensue.1 

But  the  virtue  of  true  scientific  management  is  that 
it  never  is  finished.  It  always  has  a  fringe  of  trial 
and  experiment.  It  always  is  ready  to  abandon  a 
previous  standard  for  something  better.  It  is  along 
this  fringe  of  comparison  and  experiment  that  in- 
terest in  one's  work  is  to  be  found.  If  the  worker 
does  not  share  in  this  experimental  side  of  his  work, 
the  interesting  part  of  it  is  taken  away  from  him  and 
monopolized  by  the  scientific  manager.  The  great 
field  of  scientific  management  is  to  make  the  work 
interesting  for  the  worker. 

I  know  an  inventor  who  was  trying  to  work  out  in 
practice  a  new  mechanical  device.  His  laboratory 
experiments  were  perfect.  His  employer  accepted 
them  and  gave  him  every  facility  for  introducing 
them  in  the  factory.  The  workers  were  indifferent 
and  interested  only  in  their  wages.  The  factory 
experiments  were  disappointing.  Finally  he  made 
the  employees  partners  in  the  experiments.  Immedi- 
ately a  multitude  of  practical  suggestions  began  to 

»  Hoxie,  R.  F.,  Scientific  Management  and  Labor  (1915),  pp.  113-122. 


158  INDUSTRIAL  GOODWILL 

come  from  them  and  the  device  rapidly  became  practi- 
cable. He  had  tapped  an  unknown  reservoir  of  ideas 
and  experience  that  may  be  found  in  every  factory. 

I  do  not  say  that  the  factory  should  be  converted 
into  a  laboratory  for  experiments.  I  only  say  that 
the  labor  department  of  the  factory  should  have  its 
experimental  department,  where  new  ideas  are  wel- 
come and  every  worker  with  an  idea  can  take  part. 
But,  of  course,  it  depends  on  the  personality  that 
conducts  the  department.  Here  is  the  great  field 
opening  up  for  scientific  management.  The  leaders 
and  pioneers  appreciate  it.1  Two  things  especially 
stand  in  its  way:  the  demand  of  employers  for  quick 
results  and  the  notion  that  workmen  are  interested 
only  in  the  pay  envelope. 

The  scientific  manager  may  get  quick  results,  may 
reduce  costs  and  increase  output  and  profit,  but  if 
he  does  it  at  the  expense  of  losing  the  interest  of  the 
workers,  then  quick  results  bring  increased  costs 
elsewhere  in  the  unrest  and  indifference  of  labor. 
And  the  pay  envelope  is  of  course  important.  It  takes 
no  genius  to  arouse  interest  in  the  pay  envelope. 
But  it  takes  some  ingenuity  and  personality  to  arouse 
interest  in  the  work  that  goes  along  with  the  pay. 
Very  nice  and  accurate  computations  may  be  made 
of  just  the  amount  of  payment  by  premiums,  bonuses, 
or  piece-rates,  that  is  necessary  to  get  the  worker 
to  exert  himself.  "  Payment-by-results "  keeps  the 
money  inducement  uppermost  at  every  hour  of  the 

1  See,  for  example,  the  experiments  made  by  R.  B.  Wolf  and  re- 
ported in  the  Bulletin  of  the  Society  to  Promote  the  Science  of  Manage- 
ment, August,  1915,  March,  1917;  Proceedings  of  the  Employment 
Managers'  Conference,  Philadelphia,  Pennsylvania,  April  2  and  3,  1917, 
Bulletin  227,  United  States  Bureau  of  Labor  Statistics. 


PERSONALITY  159 

day,  and  crowds  out  other  inducements.  To  get 
as  much  money  as  he  can  for  as  little  effort  or  thought 
as  he  must  give  up,  becomes  the  main  idea  of  the 
piece  worker  and  bonus  worker.  It  requires  no 
genius  or  personality  to  get  this  idea  into  the  worker's 
head.  Piece-work  and  bonus  work  are  mechanical 
substitutes  for  personality.  The  factory  is  wound 
up,  as  it  were,  like  a  machine,  with  its  wheels  and 
cogs  adjusted  to  a  schedule  of  prices,  and  the  operator 
can  go  away  and  let  it  work  itself. 

But  personality  cannot  go  away.  It  is  the  life  of  a 
going  concern.  It  is  always  on  the  job.  The  schedule 
of  prices  is  a  schedule  of  thousands  of  labor  contracts. 
The  labor  contract  cannot  be  tied  up  like  a  mortgage. 
It  is  a  new  contract,  a  new  agreement,  every  hour 
of  the  day  and  every  day  in  the  year.  The  up-to- 
date  merchant  does  not  employ  even  the  cheapest 
clerk  who  merely  throws  down  the  goods  with  their 
labeled  prices  on  the  counter  and  lets  the  customer 
take  it  or  leave  it.  So  the  up-to-date  employer 
does  not  employ  the  foreman,  straw  boss,  superintend- 
ent, manager,  who  only  knows  how  to  figure  out 
prices  and  lets  the  worker  take  it  or  leave  it. 

For  personality  can  be  created.  The  merchant, 
whether  he  knows  it  or  not,  has  his  school  of  sales- 
manship, the  employer  his  school  of  foremanship. 
Personality  of  a  kind  is  taught,  or  perhaps  only 
picked  up,  in  the  one  and  in  the  other.  But  not 
many  employers  have  their  school  of  personality 
with  its  separate  organization  for  creating  personality. 
It  goes  without  saying  that  the  candidate  must 
know  the  mechanical  details  of  figuring  and  getting 
out  the  work.  But  that  is  not  personality.  Likewise 


160  INDUSTRIAL  GOODWILL 

he  must  have  a  minimum  of  native  character  on  which 
to  build.    But  mere  individuality  is  not  personality. 

Personality  is  individuality  plus  power— it  is  the 
psychology  of  influence  without  the  power  of  compul- 
sion. It  is  developed  by  trial  and  error;  by  experi- 
ment, success  and  failure;  by  exchange  of  ideas  and 
experiences;  by  study  of  leadership;  by  self-examina- 
tion; by  cultivating  health,  vitality,  courage,  initia- 
tive, self-confidence,  enthusiasm,  and,  above  all, 
sympathy  with  the  other  man's  point  of  view,  imagina- 
tion that  puts  one's  self  in  his  place,  and  sincerity 
that  inspires  his  confidence. 

People  are  not  born  with  these  qualities;  they  are 
not  acquired  by  accident;  the  public  schools  may 
not  have  learned  how  to  teach  them;  vocational 
schools  may  overlook  them;  but  modern  industry  and 
democracy  require  them.  And  the  business  corpora- 
tion can  teach  them  when  the  proprietors  see  that 
they  need  them. 

For  the  corporation  can  specialize  in  personality. 
This  is  the  meaning  of  the  movement  to  set  up  a 
" labor  department,"  a  " division  of  personnel," 
an  " employment"  or  " service"  department,  a  " trade 
board"  or  "board  of  arbitration,"  in  the  factory,  on 
an  equality  with  the  sales  department,  the  financial 
department,  or  the  production  department.  The 
labor  department  is  the  school  of  personality  that 
deals  with  labor.  Throughout  its  entire  personnel, 
from  the  nurse,  doctor,  the  safety  and  welfare  experts, 
the  apprenticeship  school,  the  vestibule  school,  to  the 
foreman,  the  scientific  manager,  the  employment 
manager,  its  standards  of  success  are  the  interest, 
loyalty,  goodwill,  of  labor.  Each  member  of  its 


PERSONALITY  161 

staff  is  a  mediator  between  capital  and  labor.  To 
their  technical  knowledge  of  the  needs  of  the  businiw 
must  be  added  the  personality  that  wins  the  confidence 
of  employer  and  employee. 

But  personality  cannot  be  created  by  commands 
nor  bought  with  money.  The  sham  may  take  orders 
from  above  and  be  subject  to  the  employer's  will  in 
all  details.  But  the  true  is  independent.  It  issues 
orders,  even  to  the  employer,  and  it  cannot  be  bought 
because  it  has  risen  to  the  level  of  a  profession  whose 
members  look  for  the  approval  of  others  in  the  pro- 
fession over  and  above  the  approval  of  their  employer. 
They  do  what  is  "right,"  not  what  they  are  ordered 
to  do;  they  have  sold  to  the  employer,  not  themselves, 
but  their  professional  advice  of  what  he  ought  to  do. 

We  see  this  new  profession  forming  itself  about  us 
and  beginning  to  fill  the  gap  between  capital  and  labor. 
Its  literature  is  taking  shape.  Its  conventions  and 
conferences  are  held  where  experiences  are  exchanged, 
experiments  compared,  scientific  principles  developed; 
where  professional  ethics,  professional  enthusiasm 
and  pride  in  a  noble  calling  are  lifting  its  members 
above  dependence  on  any  particular  employer  who 
happens  to  hire  them.  They  are  beginning  to  lay 
down  the  law,  not  of  coercion,  but  the  law  of  good- 
will— the  law  of  health  and  safety,  of  vocational 
training,  the  law  of  employment,  promotion,  dismissal, 
payment  of  wages,  and  all  the  other  relationships  of 
capital  and  labor.  They  are  beginning  to  be  a  new 
personality  in  industry. 

The  very  separation  of  capital  and  labor  and  the 
concentration  of  absentee  ownership  calls  them 

forth  and  opens  the  gap  for  them  to  occupy.     It 
11 


162  INDUSTRIAL  GOODWILL 

cannot  be  expected  that  all  capitalists  or  employers 
will  recognize  them  as  a  profession  or  yield  to  them 
that  independence  in  the  shop  without  which  they 
cannot  develop.  It  requires  considerable  breadth 
of  view  to  be  willing  to  submit  to  constitutional 
government.  The  exercise  of  power  in  all  its  details 
seems  in  itself  to  be  attractive  even  though  it  costs 
something  at  times.  To  come  out  on  top  is  gratify- 
ing, even  at  the  expense  of  goodwill  and  personality 
in  others.  For  such  employers  there  seems  to  be  no 
remedy  except  the  superior  power  of  trade  unions  or 
government.  I  have  seen  a  marked  change  occur  in 
the  character  of  an  employer  through  the  influence 
of  a  successful  strike.  Not  that  he  becomes  merely 
conciliatory  and  willing  to  compromise,  but  that  his 
convictions  and  ethical  beliefs  themselves  undergo 
a  change.  He  listens,  gets  the  point  of  view,  regrets 
his  oversight,  is  interested  in  remedying  unnoticed 
abuses,  patient  hi  handling  unfounded  grievances. 
It  is  then  that  he  welcomes  the  specialist,  defers  to 
another's  judgment,  enlarges  his  labor  department, 
gives  his  mediators  a  free  hand. 

And  the  right  kind  of  legislation  and  administration 
of  labor  laws  has  a  similar  effect.  A  certain  employer, 
who  regularly  kicked  out  the  factory  inspector, 
ended  by  prosecuting  him  in  court.  But  when  the 
workmen's  compensation  law  came  in,  with  its 
automatic  penalties  for  all  accidents,  he  proudly 
sat  with  the  inspectors  and  the  representatives  of 
labor,  and  helped  them  on  behalf  of  the  employers 
to  frame  up  the  safety  rules  to  govern  his  business. 
In  this  way,  unionism  and  government,  properly  con- 
ducted, are  a  factor  in  creating  personality.  They 


PERSONALITY  103 

eliminate  coercive  power  and  call  forth  mental  and 
moral  power. 

Personality  has  been  and  always  will  be  the  con- 
trolling figure  in  industry.  Carnegie  could  pick  out  a 
Schwab  or  a  Frick,  place  a  tremendous  inducement 
before  him,  then  go  away  on  long  vacations  and  let 
the  business  run  itself.  Rockefeller  could  surround 
himself  with  geniuses.  But  personality  in  the  past 
could  succeed  in  the  few  because  it  was  lacking  in  the 
many.  It  could  use  thousands  and  even  millions  of 
immigrants  from  the  oppressed  nationalities  of  Europe 
whose  ignorance  and  submissiveness  were  the  product 
of  conquest. 

The  new  America  promises  to  be  an  educated 
America.  "  Americanization "  means  the  spread  of 
independence  in  the  shop.  The  individuals  cannot 
be  swung  in  a  mass  by  the  boss,  or  the  labor  agent,  or 
the  padrone,  but  may  be  expected  to  assert  themselves. 
Great  and  exceptional  personalities  there  will  be. 
But  they  will  work  through  hundreds  and  thousands 
of  lesser  ones.  The  Carnegies  and  Rockefellers  of 
the  future  will  not  only  pick  out  a  few  but  will  train 
many  of  them,  all  along  the  line,  for  the  thousands 
of  positions  where  the  interests  and  prejudices  of 
labor  must  be  consulted. 

And  the  laborers  themselves  are  producing  their 
own  leaders  with  their  own  ideas  and  personalities. 
The  kind  of  leaders  that  they  put  forward  is  largely 
determined  in  the  end  by  the  kind  that  the  capitalists 
select  to  meet  them.  At  first  they  make  mistakes. 
They  elect  fool  committees  to  represent  them.  They 
have  never  been  consulted  and  they  suddenly  acquire 
a  feeling  of  power  and  self-importance.  They  must 


164  INDUSTRIAL  GOODWILL 

learn  by  their  own  mistakes.  Here  is  the  hardest 
test  of  personality  on  the  part  of  the  employer  and 
his  representatives — the  patience  and  ability  to  con- 
sult with  those  who  have  not  yet  learned  how  to 
govern  themselves. 

In  the  end  it  is  not  masses  or  leaders,  or  committees, 
that  are  dealt  with.  It  is  each  individual  worker  in  the 
shop.  Labor  moves  in  a  mass  because  that  is  the 
way  its  individuals  get  more  liberty  and  power. 
What  the  individuals  want  determines  what  their 
leaders  demand. 

It  is  in  the  daily  and  hourly  dealings  with  every 
worker  in  the  shop  that  their  ideas  are  formed  and 
their  demands  are  formulated.  There  is  where  their 
committees  and  leaders  get  their  ideas  and  support. 
There  is  where  the  employer's  personality  counts— 
not  a  great  personality  at  the  top  but  scores  and  hun- 
dreds of  personalities  at  every  point  and  every  hour 
of  contact  with  every  worker  in  the  shop.  The  em- 
ployer who  has  learned  how  to  select  and  train  these 
subordinates,  who  has  his  school  of  personality  for 
those  who  represent  him  hi  his  dealings  with  labor, 
is  the  one  who  is  beginning  to  meet  the  situation. 

A  certain  amount  of  idealism  and  imagination  is 
needed  to  grasp  these  new  conditions  and  possibilities. 
Says  the  " director  of  personnel' '  in  a  great  corpora- 
tion, "a  new  heaven  and  a  new  earth  are  being  made 
in  the  thinking  along  this  line."  But,  he  goes  on, 
"the  promotion  of  such  a  view  point  might  be  diffi- 
cult with  the  usual  general  manager  unless  the 
employment  manager  had  a  better  standing  than  he 
ordinarily  has."  In  his  particular  establishment  the 
"division  of  personnel"  has  this  recognized  standing 


PERSONALITY  166 

as  a  part  of  the  whole  enterprise,  and  for  this  reason  hn 
hopes  to  work  out  "something  worth  while." 

It  goes  back  to  the  board  of  directors,  the  stock- 
holders, even  the  bankers  and  creditors.  If  they  are 
not  converted  to  this  new  heaven  and  new  earth, 
then  there  is  no  place  for  a  "director  of  personnel." 
He  is  a  dreamer,  a  utopist,  to  be  tied  down  by  strict 
orders  from  above.  He  is  suspected  of  ignorance  of 
human  nature.  He  is  raising  dangerous  hopes  of 
collective  bargaining.  His  mistakes  weigh  heavy  and 
he  is  given  no  chance  to  make  mistakes.  He  is 
reduced  to  the  level  of  a  routine  worker.  But  with 
a  little  imagination  on  the  part  of  capitalists  that  can 
picture  the  daily  life  of  the  workers  in  their  shops,  with 
a  little  idealism  that  can  picture  something  different 
from  what  they  are  accustomed  to,  the  personnel 
department  may  rise  to  a  recognized  place  as 
industry's  school  of  personality. 

And  the  reason  why  this  personnel  department  is 
attaining  this  high  recognition  is  because  the  labor 
problem  has  ceased  to  be  a  problem  merely  of  the 
demand  and  supply  of  labor.  The  personnel  depart- 
ment is  not  the  employment  department.  It  is  not 
the  department  of  hiring  and  firing.  It  is  the 
department  that  deals  with  every  human  relation 
within  and  without  the  establishment.  It  is  the  depart- 
ment of  industrial  goodwill.  It  is  the  department 
of  justice  as  well  as  the  department  of  health  and 
efficiency.  It  is  the  department  of  personality. 
Raised  to  its  proper  place  of  equality  with  other 
departments  it  is  the  department  that  guides  the 
entire  establishment  in  the  administration  of  justice, 
industrial  welfare,  and  service  to  the  nation 


166  INDUSTRIAL  GOODWILL 

With  such  an  exalted  position  its  motto  for  its  own 
guidance  may  well  become  that  same  "due  process 
of  law7'  which  guides  the  judicial  branch  of  govern- 
ment under  the  American  Constitution.  No  citizen 
may  be  deprived  of  life,  liberty,  or  property  without 
due  process  of  law.  But  he  may  be  deprived  with 
due  process  of  law.  No  worker  may  be  deprived  of 
his  job,  which  is  labor's  life,  liberty  and  property, 
without  due  process  of  law.  Due  process  signifies 
investigation  of  all  the  facts  in  the  case  and  due  weight 
given  to  each  fact  before  decision  is  made.  Inves- 
tigation signifies  the  right  to  a  hearing  in  order 
that  all  the  facts  may  be  known.  Due  weight  signi- 
fies that  the  conflicting  facts  in  the  case  shall  be 
weighed,  and  each  shall  be  given  its  just  weight  and 
importance  in  making  up  the  final  decision. 

No  single  case  is  like  any  other,  and  no  establish- 
ment is  like  any  other  establishment.  The  facts  are 
always  different  and  must  therefore  be  weighed. 
But  they  are  always  weighed  according  to  the  theory 
and  purpose  entertained  by  him  who  weighs  them. 
If  the  judge  or  employment  manager  looks  upon 
labor  as  a  commodity,  then  he  weighs  the  facts 
according  to  the  theory  of  demand  and  supply.  If  he 
looks  upon  labor  as  a  machine  he  gives  weight  to  the 
facts  that  get  maximum  output  from  the  individual. 
If  he  entertains  the  goodwill  theory  then  the  facts 
that  promote  goodwill  are  looked  for  and  get  a  proper 
emphasis  in  his  mind.  If  he  sees  in  labor  the  great 
foundation  of  national  welfare  and  national  integrity 
then  the  facts  that  promote  patriotism  get  due  weight 
in  his  mind.  If  he  finds  a  place  in  his  heart  for  the 
notions  of  solidarity,  partnership,  and  democracy 


PERSONALITY  167 

of  capital  and  labor,  then  the  facts  that  lead  in  that 
direction  get  larger  emphasis  and  are  seriously  investi- 
gated and  found. 

Only  the  foolish,  the  ignorant,  the  biased  or  th<« 
arbitrary  man  ties  himself  up  to  a  single  theory. 
Every  theory  has  its  proper  place  as  an  instrument 
in  weighing  the  facts.  It  is  this  that  is  due  procew 
of  law.  This  is  investigation  of  all  the  facts  and  due 
weight  given  to  each. 

And  it  is  this  that  gives  to  personality  its  highest 
attribute — ' '  reasonableness. ' '  The  employment  mana- 
ger, the  scientific  manager,  the  welfare  worker,  the 
foreman,  the  superintendent,  any  or  all  of  the  employ- 
er's representatives,  may  have  all  of  the  technical 
qualities  needed,  but  if  he  does  not  have  reasonableness 
he  fails.  And  reasonableness  can  be  cultivated  in 
the  personnel  department,  like  any  other  quality. 
It  is  just  ordinary  common  sense  raised  to  the  level 
of  a  science.  It  is  more  than  scientific  management, 
it  is  scientific  justice.  It  is  more  than  personnel, 
it  is  personality.  It  is  ability,  not  only  to  see  all  the 
facts  but  to  hunt  for  them  and  find  them.  It  is 
capacity  to  give  every  man  a  hearing;  capacity  to 
distinguish  the  true  and  the  false;  capacity  to  dis- 
tinguish the  essential  and  the  non-essential;  capacity 
to  inspire  confidence  by  reason  of  sincerity  and  open- 
mindedness;  above  all,  it  is  capacity  to  be  guided  by 
that  grand  purpose  of  promoting  public  welfare  that 
should  guide  all  industry  and  that  gives  to  industry 
a  noble  place  in  the  nation's  life. 


XVI 
DEPRESSION 

A  curve  showing  the  movement  of  prices  during  the 
nineteenth  century  is  a  picture  of  cycles  of  prosperity 
and  depression.1  Wholesale  prices  are  employer's 
prices.  While  wholesale  prices  are  moving  upward, 
profits  are  increasing. 

Retail  prices  are  the  cost  of  living.  Retail  prices 
lag  five  or  six  months  behind  wholesale  prices  and 
do  not  rise  as  high  or  fall  as  low  as  wholesale  prices.2 

The  rise  in  employer's  prices  and  profits  increases 
the  demand  for  labor.  The  unemployed  are  set  to 
work,  and  those  already  employed  get  more  work. 
Without  an  increase  in  wages,  the  earnings  of  labor 
on  the  whole  are  increased.  Finally,  the  wages  begin 
to  rise  with  the  rise  in  retail  prices,  or  cost  of  living, 
and  consequently  earnings  increase  under  the  two- 
fold influence  of  higher  rates  of  wages  and  more  work. 

The  downward  movement  is  the  reverse.  Retail 
prices  and  wages  lag  several  months  behind  the  fall  in 
wholesale  prices.  Profits  decline,  laborers  are  laid  off 
or  put  on  short  time,  and,  while  the  rates  of  wages 
remain  relatively  high,  unemployment  or  slack  em- 
ployment reduces  the  earnings  of  labor. 

For  a  hundred  years  this  wave  has  been  moving  up 
and  down  across  all  the  nations  that  have  been  bound 

1  Figure  I. 
8  Figure  II. 

168 


DEPRESSION 


109 


170 


INDUSTRIAL  GOODWILL 


Bog    8    8    §    §    g    §    g 

Q  CD    «*         »-«         •-«          H          t-l          H          ,-IH 

55 


§    s 


DEPRESSION  171 

together  by  transportation  and  commerce.  The  curve 
of  prices  and  wages  for  America  is  substantially 
the  curve  for  Europe.  And  in  all  countries  it  has 
had  its  reflection  in  labor  movements  and  politics. 
During  the  rise  in  prices  and  profits  labor  becomes 
aggressive.  Labor  unions  are  organized,  short  and 
successful  strikes  multiply,  wages  are  advanced  with- 
out strikes.  During  the  fall  in  prices  labor  unions 
are  less  aggressive,  strikes  on  a  falling  market  are  less 
successful,  and  laborers  turn  to  politics,  protective 
tariffs,  socialism,  panaceas  or  even  revolution.  The 
long  depression  from  1837  to  1848  was  the  period  of 
Chartism  in  England;  socialism,  anarchism,  revolution 
in  Europe;  protective  tariff  and  humanitarian  reforms 
in  America.  The  prosperity  that  began  in  1850 
was  the  beginning  of  modern  trade  unionism  in 
England  and  America  and  the  restoration  of  monarchy 
in  Europe.  The  Civil  War  period  was  one  of  pros- 
perity and  labor  organization  in  America  and  Europe, 
followed  by  the  long  depression,  until  1879,  with  its 
greenbackism,  anarchism,  socialism,  and  the  decline 
of  trade  unionism.  The  recovery  after  1880  and  the 
ups  and  downs  since  that  time  are  reflected  in  the 
enlargement  of  trade  unionism  when  labor  has  been 
in  demand,  and  political  and  socialistic  panaceas 
when  unemployed.1 

The  wave  climbed  another  summit  in  the  midst  of 
the  great  war — an  artificial  height  raised  up  by  the 
demands  of  governments  and  the  substitution  of 
credit  for  money.  Yet,  unlike  former  periods,  prices, 
profits,  wages  and  strikes  were  controlled  and  supplies 

1  Figure  III.  See  also  Commons  and  Associates,  History  of  Labor 
in  the  United  States. 


172 


INDUSTRIAL  GOODWILL 


173 

were  rationed  by  the  governments.  Even  a  League  of 
Nations  was  created  with  not  only  its  army  but  also 
its  international  board  of  food  controllers  and  it- 
centralized  boards  of  control  over  the  world's  indus- 
tries, finance  and  shipping. 

With  the  break-up  of  this  national  and  international 
control,  the  world  again  faces  a  period  of  deprc- 
while  competitive  prices  and  wages  are  again  seeking 
their  lower  levels.  Notwithstanding  the  destruction 
of  war,  labor  reached  a  high  level  of  wages  and  earn- 
ings in  terms  of  money,  on  both  sides  of  the  battle 
line,  unknown  in  time  of  peace.  With  these  high 
prices  and  wages  employers  cannot  be  expected  to 
shift  from  war  to  peace  while  they  are  uncertain  as 
to  the  future  decline  of  prices  and  wages. 

The  World  War  silenced  for  a  time  the  contest  of 
capital  and  labor.  Employers  submitted  to  regula- 
tions designed  to  eliminate  profits  by  means  of  cost 
contracts  and  excess  taxes.  Organized  labor  yielded 
the  right  to  strike  in  view  of  governmental  regulation 
of  wages,  hours  and  conditions  of  employment.  Patri- 
otism united  capital  and  labor.  But  with  the  return 
of  peace  and  depression,  this  tie  of  patriotism  is 
loosened. 

At  the  same  time,  organized  labor  in  all  lands 
reached  a  political  influence  unknown  hitherto.  Its 
leaders  were  admitted  to  a  share  along  with  capital- 
ists in  the  governmental  control  of  industry.  While 
they  yielded  the  right  to  strike,  they  gained  a  voice 
in  the  regulation  of  prices,  profits  and  wages.  No 
previous  war  or  previous  prosperity  offers  a  parallel. 

Yet,  just  as  in  previous  periods,  outside  the  ranks 
of  organized  labor,  certain  interests  that  are  quies- 


174  INDUSTRIAL  GOODWILL 

cent  in  time  of  prosperity  come  forth  when  aggressive 
labor  is  weakened  by  depression  and  unemployment. 
At  the  one  extreme  are  those  business  interests  which 
since  the  Civil  War  have  controlled  American  industry, 
again  looking  forward  to  a  return  of  then*  uncontrolled 
liberty  in  home  affairs  but  also  looking  forward  to  a 
new  power  and  a  new  assistance  of  government  in 
enlarging  foreign  markets  and  foreign  investments. 
For  them,  the  period  of  depression  serves  to  weaken 
the  power  of  organized  labor  in  industry  and  govern- 
ment and  to  strengthen  then*  own  promises  to  labor 
of  a  return  of  prosperity,  if  they  have  control. 

At  the  other  extreme  are  the  class  known  in  Europe 
as  the  " intellectuals" — physicians,  lawyers,  profess- 
ors, politicians,  economists — the  leaders  in  socialism, 
anarchism,  politics,  and  other  promises  to  labor,  who, 
in  times  of  depression  and  unemployment  compete 
successfully  with  the  leaders  of  organized  labor  for 
the  support  of  labor. 

Each  period  of  depression  and  unemployment 
for  a  hundred  years  has  seen  this  rivalry  of  capital- 
istic politicians  and  labor  politicians  for  the  support  of 
labor.  In  Europe  it  has  been  the  contest  over 
socialism,  anarchism,  syndicalism,  culminating  in 
the  revolutions  of  1848  and  the  reaction  of  1850;  or 
the  revolutions  of  1917  and  1918.  In  America  it  has 
been  contests  over  protective  tariffs,  greenbackism, 
silver,  monopolies,  and  control  of  the  courts.  The  labor 
politicians  offer  to  labor  political  power  over  capital; 
the  capitalistic  politicians  offer  employment  and 
wages. 

Hitherto,  in  no  period  of  depression,  either  in 
Europe  or  America,  have  organized  workers  and  or- 


DEPRESSION  175 

ganized  employers  joined  together  on  a  large  scale 
to  eliminate  the  intellectuals  and  the  politicians  and 
to  tide  over  the  depression  by  their  own  self-governing 
arrangements.  Perhaps  it  is  too  much  to  expect, 
notwithstanding  the  evident  advantages  that  might 
be  gained.  While  the  control  remains  merely  a  con- 
test for  power,  each  takes  advantage  of  all  the  agencies 
that  augment  its  power  at  the  expense  of  the  other. 
In  times  of  prosperity  organized  labor  gets  the  upper 
hand;  in  times  of  depression,  organized  employers. 
But  the  Great  War  revealed  another  motive,  patri- 
otism, that  mitigates  the  struggle  for  power. 

While  the  "  intellectuals "  or  labor  politicians  might 
have  taken  advantage  of  the  situation  to  make  labor 
the  supreme  power,  the  leaders  of  organized  labor 
restrained  their  followers.  For,  supreme  power  in 
the  hands  of  labor  means,  not  the  supremacy  of 
labor,  but  supremacy  of  the  labor  politician.  In 
Russia  it  has  not  been  the  workingmen  who  rose  to 
power,  but  the  "  intellectuals "  who  made  impossible 
promises  to  labor.  The  "  dictatorship  of  the  pro- 
letariat" became  the  dictatorship  of  labor  politicians. 

The  leaders  of  organized  labor,  especially  in  Eng- 
land and  America,  have  a  different  training.  They 
have  come  up  through  the  shop.  They  are  "manu- 
als," not  " intellectuals."  They  have  known  what 
it  is  to  lose  out  when  they  strike  for  the  impossible. 
They  are  aggressive  but  practical.  They  realize, 
for  the  most  part,  that  laborers  cannot  govern  the 
nation  if  they  cannot  govern  themselves.  More 
important  to  them  than  illusory  or  extravagant 
gains  in  wages  that  may  soon  be  lost,  is  the  preserva- 
tion of  their  union  which  preserves  what  they  gain. 


176  INDUSTRIAL  GOODWILL 

Like  all  good  business  men  they  demand  more  than 
they  expect  to  get.  Their  position  is  difficult.  They 
are  between  the  demands  of  employers,  the  promises 
of  the  intellectuals  and  politicians  on  the  outside,  and 
their  critics  and  rivals  on  the  inside. 

The  outcome  often  depends  on  the  attitude  of  the 
employers,  or  rather  of  the  representatives  and  leaders 
whom  the  employers  put  forward  as  their  spokesmen. 
For  they  too  speak  through  their  leaders.  If  they 
select  leaders  to  represent  them,  lawyers,  intellectuals, 
and  experts,  whose  only  idea  is  power  and  the  inalien- 
able rights  of  the  employer,  then  organized  labor  is 
likely  to  discredit  its  own  cautious  leaders  and  put 
forth  others  whose  only  argument  is  power  and  the 
inalienable  rights  of  labor. 

I  knew  a  great  labor  organization  whose  leaders 
were  able  during  a  period  of  depression  to  get  their 
rank  and  file  to  accept  successive  reductions  of  wages. 
But  it  was  because  the  employers  granted  that  indis- 
pensable condition,  the  preservation  of  the  union. 
With  the  union  preserved  against  discrimination  and 
victimization  of  its  leaders  and  officers,  it  could,  in 
cooperation  with  the  employers,  distribute  the  hard- 
ships of  unemployment  and  reduced  earnings  among 
all  its  members. 

The  situation  here,  as  in  all  other  industrial  relations, 
goes  back  to  the  question  of  personality,  and  that 
final  test  of  personality,  reasonableness.  Industry 
creates  personality  by  education  and  selection.  The 
outsider,  the  intellectual,  the  politician,  can  never 
attain  the  level  of  reasonableness  because  he  never 
can  know  by  experience  all  of  the  facts  that  must  be 
given  due  weight  in  reaching  a  plan  of  action. 


DBPRB88ION  IT: 

When  employers  and  employees  understand  each  other 
and  are  striving  not  only  for  power  but  for  reasonable 
solutions  under  the  circumstances,  they  do  not  need 
the  outsider,  however  much  they  may  rely  upon  him 
in  other  matters.  Only  when  they  rest  their  final 
appeal  on  force  and  power  and  inalienable  rights,  does 
the  outsider  seem  to  have  a  place,  and  then  his  greatest 
service  to  both  is  the  elimination  of  himself  as  soon 
as  possible. 

For  the  proper  place  of  the  " intellectual"  or  expert, 
so-called,  is  that  of  the  agent  and  not  that  of  the  prin- 
cipal. The  principals  in  industry  are  the  associated 
employers  and  the  associated  employees.  The  expert's 
place  is  that  of  attorney,  statistician,  accountant, 
economist,  mediator,  adviser,  agent,  in  short,  em- 
ployee—  of  the  principals.  The  principals  determine 
what  shall  be  done,  their  agents  execute  it.  The  agent 
becomes  the  expert  because  he  is  a  specialist,  and 
that  signifies  that  he  knows  only  the  details  of  a  small 
part  of  all  the  facts  that  must  be  weighed  in  reaching 
a  decision.  If  the  principals  abdicate,  and  government 
by  experts  takes  their  place,  the  result  is  no  less  arbi- 
trary and  coercive  than  other  forms  of  autocracy. 
It  may  be  "  scientific/'  so-called,  but  it  conceals  in  the 
name  of  science  its  ignorance  of  facts  belonging  to  a 
different  science. 

For  no  one  person  and  no  class  of  persons,  however 
expert,  can  truly  represent  in  due  proportion  all  of 
the  interests  that  clash  and  must  be  reconciled  in 
reaching  a  final  decision.  Only  the  interests  them- 
selves, that  is,  the  principals,  must  decide. 

For  this  reason  the  great  captains  of  industry  them- 
selves must  come  forward  and  deal  with  organized 

12 


178  INDUSTRIAL  GOODWILL 

labor  directly  instead  of  leaving  it  to  their  agents. 
The  captains  are  the  stockholders,  bondholders, 
investors,  bankers,  financiers.  Modern  capitalism 
hides,  as  it  were,  in  the  background,  and  puts  forward 
its  lawyers,  its  presidents  of  corporations,  its  general 
managers,  its  lobbyists,  its  agents. 

However  expert  and  even  fair-minded  these  agents 
are,  they  have  no  discretion  outside  their  limited  field, 
and  they  cannot  take  into  account  all  of  the  facts, 
both  because  they  do  not  truly  know  them  and  be- 
cause they  have  no  authority  to  act  on  all  the  facts. 
They  must  win  out  at  once,  in  the  narrow  field  as- 
signed to  them.  They  cannot  take  into  account  all 
the  facts  in  different  fields.  They  cannot  take  fully 
into  account  patriotism,  national  welfare,  the  ap- 
proaching national  and  international  solidarity  of 
labor,  the  remote  future  effects  and  reactions  that 
are  likely  to  follow,  because  they  have  no  authority 
to  do  so.  They  may  succeed  in  making  capitalism 
powerful  at  a  time  when  labor  is  weak,  but  they  may 
undermine  its  foundations  when  labor  is  strong  or 
goes  into  politics.  Only  the  principals  themselves 
can  take  into  account  all  of  these  other  considerations, 
and  they  cannot  weigh  them  if  their  only  source  of 
information  is  their  own  agents  and  experts.  When 
Carnegie  went  on  a  long  vacation  the  Homestead 
strike  occurred.  Today  a  similar  strike  might  pos- 
sibly spread  to  the  nation  or  world.  Thirty  years 
ago,  an  individual  capitalist  might  act  by  himself. 
Today  the  associated  capitalists  of  the  nation  and 
even  of  the  world  cannot  avoid  either  personal  or 
joint  responsibility. 

Neither  can  organized  labor  act  through  advocates, 


DEPRESSION  179 

retainers,  lawyers,  intellectuals,  politicians.  These 
may,  for  the  moment,  win  a  glorious  victory,  but 
they  leave  a  sting.  They  do  not  personally  suffer 
the  after  effects,  because  they  do  not  go  back  into 
the  shop  to  earn  their  living.  Immediate  and  stun- 
ning results  are  enough  for  them.  The  long  look 
ahead,  the  future  daily  bargainings  and  negotiations 
in  the  shop,  the  preservation  of  the  union  in  time  of 
depression,  the  give-and-take  that  maintains  goodwill, 
cannot  weigh  very  heavily  on  them  in  the  flush  and 
thrill  of  putting  the  employer  in  a  hole  and  getting 
the  applause  of  labor. 

On  the  continent  of  Europe  the  leaders  of  organized 
labor  are  often  from  the  professional  classes.  To 
them,  a  remote  future  of  socialism  or  syndicalism, 
when  labor  shall  be  supreme,  is  more  impressive  than 
getting  along  with  the  foremen  or  managers  in  the 
shop  tomorrow  and  next  day.  Such  leaders  can 
advance  themselves  in  politics  or  professional  prac- 
tice, and  do  it  even  more  successfuly  on  account  of 
the  unsettled  grievances  or  the  troubles  that  they 
can  stir  up,  in  the  shop.  Their  leadership  is  proof 
either  of  the  immaturity  and  ignorance  of  the  workers 
or  of  the  failure  of  employers  to  deal  directly  with 
their  employees. 

Much  the  same  is  true  of  labor  leaders  themselves 
who  have  dropped  the  idea  of  returning  to  the  shop  to 
earn  their  living  and  are  looking  forward  to  a  life  of 
politics  or  insurance  agency  or  professional  practice. 
They  have  ceased  truly  to  represent  labor,  for  it  is  not 
a  person's  memory  of  the  past  that  guides  his  acts 
but  his  expectations  of  the  future.  Neither  the 
employer  who  has  come  up  from  the  shop  nor  the 


180  INDUSTRIAL  GOODWILL 

labor  leader  who  does  not  expect  to  go  back  to  the 
shop  can  give  due  weight  to  the  expectations  of  the 
workers  in  the  shop. 

For  this  reason  the  labor  leader  who,  as  in  England, 
attempts  to  combine  the  two  activities  of  member  of 
Parliament  and  leader  of  his  union,  eventually  finds 
that  new  leaders,  directly  out  of  the  shop,  are  put 
forward  to  assert  the  claims  of  the  rank  and  file. 
This  is  one  of  the  reasons  for  the  "shop  steward" 
movement  previously  mentioned,1  for  the  shop  stew- 
ards are  but  committees  of  shop  workers.  They  are 
the  real  principals  for  they  are  the  workers  themselves 
who  expect  to  return  to  work. 

"In  England,  members  of  Parliament  formerly 
were  not  paid  salaries  from  the  public  treasury  and 
the  labor  leaders  in  Parliament  received  their  salaries 
from  their  unions.  This  has  been  changed  and  they 
no  longer  depend  on  their  unions  for  their  salaries. 
In  America,  where  the  political  salaries  are  paid  by 
the  tax  payers,  the  attempt  to  combine  the  position 
of  politician  and  labor  leader  in  one  man  is  not 
practicable.  When  elected,  the  leader  becomes  in- 
dependent of  the  workers  and  looks  to  other  classes 
for  support  in  the  elections." 

For  this  and  similar  reasons  the  progress  of  democ- 
racy is  forcing  the  separation  of  government  into  two 
branches,  the  industrial  and  the  political. 

This  separation  has  been  dimly  recognized  by  the 
socialists  of  Germany.  In  that  country,  socialism, 
their  political  branch  of  the  labor  movement,  arose 
before  unionism,  the  industrial  branch.  The  two 
have  been  kept  separately  organized,  though  the 

*  Above,  p.  118. 


hLI'HKSSION  181 

separation  has  been  largely  on  paper,  because  the 
same  individuals  have  retained  leadership  in  each. 

In  Russia  they  have  not  been  kept  separate  and 
consequently  when  Russia  was  on  the  verge  of  adopt- 
ing a  political  government  that  should  represent  all 
classes,  the  combination  of  manual  unionism  and 
intellectual  socialism  set  aside  the  constitutional  con- 
vention called  for  that  purpose,  and  proceeded  to 
operate  both  industry  and  government  by  means  of 
their  sovyets,  or  associations  of  workingmen  leaders 
and  non-workingmen  "  intellectuals. " 

France,  too,  has  not  kept  separate  the  political  and 
industrial  branches,  and  the  Confederation  of  Labor 
has  been  both  a  political  party  and  a  national  federa- 
tion of  labor  unions.1 

In  England,  both  Parliament  and  trade  unions  had 
been  long  in  existence  in  their  separate  fields  and  when 
the  unions  felt  compelled,  on  account  of  hostile 
court  decisions,  to  go  into  politics,  they  elected  a 
number  of  their  trade  union  leaders  to  Parliament 
(1906)  and  these,  with  the  political  socialists  and 
later  with  the  cooperative  societies  (1917),  constituted 
themselves  the  British  Labor  Party.  It  is  this  mixing 
of  the  political  and  industrial  activities  that  has  begun 
to  force  recognition  of  their  incompatibility  through 
the  shop  steward  movement  just  mentioned,  and  this 
has  received  recognition  in  the  notable  proposals  by 
parliamentary  committees  and  the  Ministry  of  Recon- 
struction. Shop  committees  which,  without  recog- 
nition, had  asserted  themselves  as  a  menace  to  British 
industry,  are  to  be  recognized  and  given  a  definite 

1  Estey.  J.  A.,  Revolutionary  Syndicalism,  p.  44. 


182  INDUSTRIAL  GOODWILL 

standing  in  industry  but  not  in  politics.1  Over  and 
above  these  shop  committees  are  the  Industrial  Coun- 
cils for  districts  and  the  nation,  to  be  encouraged 
and  established  in  every  industry  where  the  repre- 
sentatives of  employers  and  the  industrial,  but  not 
political,  representatives  of  the  workers  shall  deliber- 
ate, shall  agree  on  the  larger  policies  and  the  mini- 
mum standards  which  then  shall  be  recommended  for 
adoption  in  the  shops. 

Where  there  are  strong  employers'  associations  and 
strong  labor  unions,  extending  over  the  shops  of  the 
kingdom,  these  recommendations  are  enforced  without 
appealing  to  Parliament  for  compulsory  powers.  But 
where  these  organizations  do  not  exist,  then  the  so- 
called  minimum  wage  boards,  already  existing  in  the 
sweat  shop  industries,  are  to  be  extended,  with  their 
compulsory  powers  of  fixing  wages,  hours  and  condi- 
tions of  labor.2  Presumably  these  compulsory  pow- 
ers once  applied  will  be  withdrawn,  or  fall  in  abeyance, 
if  the  voluntary  organizations  arise  with  sufficient 
influence  to  take  their  place. 

Without  stopping  to  consider  further  details  or  the 
extent  to  which  this  program  of  reconstruction  is 
practicable  in  all  industries,  the  main  purpose  is 
evident.  It  is  the  creation,  outside  the  parliamentary 
and  political  government  of  Britain,  of  representative 
industrial  governments,  as  free  as  possible  from  the  in- 
terference of  those  whose  main  interests  are  intellectual, 
professional,  or  political.  If  the  plans  succeed  then 

1  Above,  p.  119. 

*  Monthly  Review,  United  States  Bureau  of  Labor  Statistics,  May, 
1918,  pp.  59-61;  September,  1918,  pp.  53-58.  Commons  and 
Andrews,  Principles  of  Labor  Legislation,  pp.  167-196. 


DEPRESSION  183 

England  will  have  opened  up  two  fields  for  the  two 
different  kinds  of  leaders  and  the  two  different  kinds 
of  problems  to  be  met. 

In  the  United  States  the  two  great  political  parties 
are  organized  and  controlled  like  private  corporal i 
and  important  legislation  is  determined  not  so  much 
by  members  of  Congress  and  the  legislatures  as  by  the 
party  organizations  which  control  those  members. 
In  matters  of  labor  legislation,  Congress  is  more  a 
forum  where  the  members  issue  campaign  speeches 
to  their  constituents  than  the  real  law-making  body. 
On  this  account  the  legislative  efforts  of  both  capital- 
ists and  organized  labor  are  directed  more  toward 
influencing  the  party  machine  than  toward  electing 
their  leaders  to  Congress  or  the  legislatures.  This 
secret  influence  of  the  lobbyists  on  both  sides  makes 
it  even  more  urgent  in  America  than  in  other  coun- 
tries, that  industrial  government  should  be  separated 
from  the  political  government,  and  that,  if  legislation 
is  necessary  it  should  first  be  agreed  upon  by  organized 
employers  and  employees  and  then  presented  to  the 
legislatures  for  adoption  without  material  change 
through  political  influence. 

The  mine  inspection  and  safety  laws  of  the  state  of 
Illinois  were  for  many  years  the  plaything  of  politics, 
were  unenforceable  and  loaded  with  "  jokers.'1 
Finally,  when  the  coal  operators'  association  and  the 
mine  workers'  union  agreed  on  a  code  of  safety,  it 
was  presented  to  the  legislature  and  enacted  into  an 
enforceable  and  reasonable  law.  The  workmen's 
compensation  and  accident  prevention  laws  of  various 
states  have  sometimes  been  drafted  in  this  extra- 
political  manner.  Under  the  Industrial  Commission 


184  INDUSTRIAL  GOODWILL 

laws  of  New  York,  Ohio  and  Wisconsin,  this  method  of 
industrial  legislation  is  applied  to  all  branches  of 
labor  legislation.1 

The  temptation,  of  course,  to  break  over  and  to  use 
political  influence  on  behalf  of  either  class  is  great, 
but  the  most  effective  and  workable  legislation  is 
probably  that  in  which  the  two  sides  in  good  faith 
stand  by  their  industrial  government.  The  political 
government  then  remains,  as  it  should,  the  instrument 
that  protects  the  general  interests  of  the  public, 
furnishes  the  statisticians  and  similar  experts,  the 
mediators  when  employers  and  employees  disagree, 
and  the  club  that  raises  backward  employers  to  the 
level  of  progressive  ones. 

This  arrangement,  of  course,  is  impossible  where 
either  side  refuses  to  deal  with  the  other,  or  where 
one  attempts  to  break  down  the  organization  of  the 
other  or  to  violate  good  faith  by  resorting  to  its  politi- 
cal influence.  It  is  then  that  the  party  politician, 
the  intellectual,  the  lawyer,  the  lobbyist,  breaks  into 
and  widens  the  gap  between  employer  and  employee. 
In  times  of  prosperity  and  patriotism  this  is  less  likely. 
In  times  of  depression  and  class  struggle  it  is  more 
likely. 

Neither  is  the  arrangement  widely  practicable  as 
long  as  the  main  fight  of  organized  labor  is  for  the 
right  to  exist.  The  decisions  of  the  Supreme  Court 
in  the  Hitchman  and  other  cases  already  referred  to, 
continue  to  lie  across  the  road  to  this  reasonable 

1  See  Commons,  Labor  and  Administration,  pp.  401-404;  Commons 
and  Andrews,  Principles  of  Labor  Legislation,  pp.  430-443;  Final 
Report  of  the  Commission  on  Industrial  Relations  (1915),  pp.  359- 
361. 


DEPRESSION  185 

goal.     Not  until  they  are  reversed  can  labor  unions 
keep  out  of  politics. 

It  is  not  worth  while  to  talk  of  ideal  solutions.  , 
problem  is  one,  not  of  ideals  but  of  alternatives. 
Ideals  are  usually  the  ideals  of  an  individual  or  a 
class.  The  socialistic  ideal  ends,  as  we  have  seen,  in 
the  dictatorship  of  organized  labor  and  the  supremacy 
of  intellectuals.  The  capitalistic  ideal  ends  in  conq 
and  imperialism.  The  problems  of  depression,  of 
unemployment,  of  wages,  hours  of  labor,  conditions  of 
work,  efficiency,  competition,  are  problems  of  adjust- 
ment and  accommodation  which  must  be  met  every 
day.  It  is  not  a  "program"  or  a  "platform"  or  a 
schedule  of  "inalienable  rights"  that  bridges  over 
the  periods  of  hardship  and  depression,  but  it  is  the 
spirit  of  true  democracy,  which  investigates,  takes 
into  account  all  of  the  facts,  gives  due  weight  to  each, 
and  works  out,  not  an  ideal,  but  a  reasonable  solution 
day  by  day. 

The  foregoing  refers  mainly  to  the  legislative 
branch  of  government.  We  have  already  noted  the 
conditions  that  apply  to  the  administrative  branch. 
It  is  here,  far  more  than  in  legislation,  that  the  daily 
cooperation  of  capital  and  labor  is  worked  out. 
The  Great  War  forced  the  nation  to  organize  its 
administrative  machinery  on  this  basis,  in  order  to 
increase  the  supply  of  munitions  of  war.  The  prob- 
lems of  peace  and  depression  call  for  similar  organiza- 
tion. The  Federal  Employment  Service,  operated 
nominally  by  government  but  actually  by  its  advisory 
boards  of  employers  and  employees,  should  be  the 
agency  kept  permanently  in  existence  for  dealing 
with  depression  and  unemployment  as  it  had  begun 


186  INDUSTRIAL  GOODWILL 

to  deal  with  prosperity  and  employment.  The  Labor 
Policies  Board,  which  during  the  war  attempted  to 
bring  together  all  of  the  agencies  of  government, 
should  become  the  really  governing  committee  of 
employer  and  employee  authorized  by  and  in  aid  of  the 
Department  of  Labor.  The  War  Labor  Board  with 
its  adjustment  of  disputes  and  its  regulation  of  wages, 
hours  and  methods  of  payment,  should  become 
the  National  Joint  Conference  of  Capital  and  Labor. 
In  each  of  these  agencies  the  circumstances  of  war 
made  it  necessary  to  have  somewhat  compulsory 
powers.  Such  powers  are  not  needed  in  time  of  peace 
except  in  minor  particulars.  The  industrial  govern- 
ment of  the  nation  must  become  mainly  a  voluntary 
government,  for  its  success  in  the  long  run  will  depend 
not  on  power,  but  goodwill. 


XVII 
THE  WORLD 

Seventy  years  ago  Karl  Marx  and  his  fellow  social- 
ists issued  from  London  their  Communist  Manifesto. 
Two  great  conclusions  were  proclaimed,  pacifism  and 
internationalism.  Both  of  these  doctrines  grew  out  of 
what  Marx  interpreted  to  be  the  economic  develop- 
ment of  history.  Modern  industry  had  grown  up 
since  the  invention  of  the  steam  engine.  Capitalism 
had  spread  beyond  the  bounds  of  a  single  nation. 
Capitalists  knew  no  country  and  sought  investments 
and  markets  in  all  parts  of  the  world  where  profits 
could  be  obtained. 

On  the  other  hand,  labor  had  nothing  to  expect  from 
the  governments  or  capitalists  of  Europe.  The  work- 
ingmen  of  all  nations  must  organize  throughout  all 
nations.  Because  capital  had  become  international, 
labor  organizations  must  become  international. 

And  so,  while  Marx  attacked  both  property  and 
government,  he  also  held  up  to  the  workingmen  a 
grand  ideal  of  the  international  brotherhood  of  labor. 
Labor  would  ultimately,  without  any  effort  on  its  own 
part  but  by  the  natural  evolution  of  industry,  come 
into  possession  of  the  machinery  of  production.  The 
capitalists  would  disappear,  and  with  them  would 
disappear  nations.1 

But  there  were  certain  forces  which  Karl  Marx 
underestimated.  He  underestimated  the  power  of 
patriotism.  He  might  indeed  disregard  patriotism  in 

1  Communist  Manifesto,  Chas.  Kerr  and  Company,  Chicago. 

187 


188  INDUSTRIAL  GOODWILL 

1848,  for  at  that  time  the  countries  of  Europe  were 
split  into  small  principalities,  republics,  and  king- 
doms. Italy  had  not  yet  attained  unity.  The 
German  Empire  was  fifteen  years  ahead.  Austria 
and  Hungary  were  exploiting  subject  races.  No 
one  could  very  well  picture  a  spirit  of  patriotism 
toward  these  principalities  and  oppressors. 

But  with  the  struggle  in  Italy  which  brought  about 
Italian  unity,  with  the  struggles  in  Germany  which 
founded  the  German  Empire,  more  powerful  than 
class  struggle  or  the  international  brotherhood  of  man 
is  the  spirit  of  patriotism  which  binds  together  the 
peoples  of  a  nation  regardless  of  classes,  and  thus 
builds  up  what  we  have  seen  in  our  own  nation  since 
1865 — the  spirit  of  nationality. 

We  have  seen  the  socialists  of  a  nation  which,  more 
than  any  other,  had  adopted  socialism,  the  most 
powerful  socialistic  body  in  the  world,  the  most  ortho- 
dox in  the  Marxian  doctrine,  abandon  their  principles 
of  internationalism  and  join  with  the  capitalists  of 
then-  own  country  to  exploit  the  workingmen  of  the 
rest  of  the  world.  We  have  seen  this  spirit  of  patriot- 
ism degraded  beneath  the  high  principles  of  interna- 
tional brotherhood  which  Karl  Marx  had  set  before 
the  workingmen  of  the  world.  Patriotism,  a  noble 
principle,  recognized  in  all  nations  as  something  that 
should  bring  forward  a  better  future  for  the  world, 
became  the  very  foundation  of  a  cruel  struggle  for 
world  empire  and  a  denial  of  the  brotherhood  of  labor. 

Another  thing  that  Karl  Marx  underestimated  was 
trade  unionism.  In  1848  the  world  had  just  passed 
through,  or  was  closing  up,  a  period  of  depression  in 
business.  After  the  panic  of  1837  the  workingman's 


Till:   \VURLD  189 

condition  throughout  Europe  and  America  had  been 
growing  steadily  worse.  It  was  a  long  period  of 
depression,  of  unemployment,  of  poverty  and  misery. 
On  the  basis  of  that  experience  of  ten  years,  Karl 
Marx  laid  down  the  universal  law  that  the  progress  of 
capitalism  meant  the  pauperization  of  labor.  So  far 
as  he  had  the  facts  up  to  date  he  was  correct.  Through- 
out the  entire  world,  in  Europe  and  in  America, 
had  grown  up  many  varieties  of  anarchistic  and 
socialistic  doctrines.  From  that  narrow  foundation 
of  history  Karl  Marx  predicted  a  future  in  which  the 
workingman  would  grow  continually  worse  in  his 
poverty,  until  ultimately  his  condition  would  become 
so  bad,  and  capitalism  itself  would  so  completely  have 
destroyed  its  own  power,  that  the  workingman  would 
by  some  magic  come  into  possession  of  those  things 
which  capitalism  had  created. 

But  what  has  happened  since  that  time?  It  is  only 
since  1850  that  modern  trade  unionism  has  acquired 
any  particular  power.  Modern  labor  organization 
began  in  England  in  the  decade  of  the  fifties  and  in 
America  in  the  same  decade,  spreading  afterward  to 
Germany,  France,  and  the  world.  This  movement  of 
trade  unionism  has  been,  not  a  passive  submission  of 
labor  to  economic  evolution,  but  a  struggle  of  labor  to 
better  its  condition  day  by  day.  Karl  Marx  could  not 
predict  what  trade  unionism  would  accomplish.  He 
could  not  see  that  labor,  through  its  own  organization, 
might  ultimately  be  in  a  position  to  improve  the  con- 
ditions of  labor,  to  raise  wages,  to  shorten  working 
hours.1 

1  See  Commons  and  Associates,  History  of  Labor  in  the  United 
States,  New  York,  1918. 


190  INDUSTRIAL  GOODWILL 

Neither  does  trade  unionism  offer  an  ideal  solution 
for  the  remote  future.  It  has  no  "  program, "  which 
means  revolution.  It  has  only  the  every-day  problem 
of  bettering  the  condition  of  labor  under  the  existing 
capitalistic  government.  If  that  government  is  impe- 
rialistic then  trade  unionism  shares  the  fruits  of  impe- 
rialism. In  Germany  we  have  seen  the  triumph  of 
trade  unionism  rather  than  the  triumph  of  socialism. 
We  have  seen  labor  unite  with  the  capitalists  to  reduce 
the  workingmen  and  farmers  of  Russia  to  the  status 
of  vassals  for  the  sake  of  higher  wages  for  German 
labor  and  higher  profits  for  German  capital. 

Another  thing  which  Karl  Marx  overlooked  was  the 
possibility  of  labor  legislation.  When  the  Communist 
Manifesto  was  written  in  1848  there  was  but  one 
nation  which  had  enacted  any  protective  legislation  on 
behalf  of  the  working  people.  Only  one  year  before 
the  Manifesto  was  written,  England,  after  many  years 
of  agitation,  put  on  her  statute  books  the  first  law  in 
the  history  of  the  world  requiring  that  the  labor  of 
women  in  industries  be  reduced  to  ten  hours  a  day. 
This  first  example  of  labor  legislation  had  occurred 
so  shortly  before  the  date  of  the  Communist  Manifesto 
that  its  consequences  could  not  be  estimated.  But 
since  that  time  in  all  modern  countries  a  great  social 
movement  has  brought  about  labor  legislation  in  all 
forms;  the  protection  of  women  and  children,  mini- 
mum wages,  industrial  education.  All  of  these  agen- 
cies have  come  forward  to  improve  the  condition  of 
labor,  and  it  was  Germany  again  which  profited  most 
and  first  by  this  modern  movement  for  such  legislation. 

Germany,  under  Prince  Bismarck,  who  had  brought 
about  German  unity,  now  turned  upon  the  socialists 


/•///•;  WOHLb  101 

in  order  to  drive  them  out  of  Germany.  In  1878  waa 
enacted  the  famous  anti-socialist  law  which  prohibited 
all  organizations  of  labor  and  all  agitation  and  propa- 
ganda of  socialistic  doctrine.  That  law  stood  on  the 
statute  books  of  Germany  until  1890 — twelve  years. 

But  it  was  not  anti-labor  legislation,  it  was  pro- 
labor  legislation  that  saved  Germany.  Immediately 
after  the  enactment  of  the  anti-socialist  law,  Bismarck 
proceeded  to  introduce  in  Germany  the  measures  for 
workmen's  compensation,  sickness  insurance,  health 
and  invalidity  insurance,  old-age  pensions— that  nota- 
ble series  of  indemnities  for  labor  against  the  insecurity 
of  accident,  sickness,  and  misfortune. 

Bismarck's  policy  was  designed  to  undermine  the 
influence  of  socialism,  to  win  the  workingmen  away 
from  the  socialist  movement  and  attach  them  to  the 
government. 

Following  this  came  that  other  forward  step  in 
Germany,  industrial  and  vocational  education,  in 
pursuance  of  which  German  employers  consented  that 
their  workmen  under  the  age  of  eighteen  should  be 
allowed  as  much  as  one  day  a  week,  on  pay,  to  devote 
to  an  education  in  the  trade  or  occupation  in  which 
they  were  engaged. 

Thus  Germany  cemented  the  labor  element  to  the 
Empire,  and  when,  in  1914,  the  German  government 
called  upon  the  socialist  leaders  to  go  out  with  their 
propaganda  into  other  nations  and  to  break  down  the 
morale  of  Italy,  France,  and  Russia,  the  argument 
which  these  leaders  put  forward  to  justify  themselves 
was  the  claim  that  social  legislation  in  Germany  had 
done  more  for  German  workingmen  than  had  been  done 
by  any  other  nation  for  its  workingmen.  England  and 


192  INDUSTRIAL  GOODWILL 

France  entered  upon  this  class  of  legislation  long  after 
Germany.  Other  nations  have  been  twenty  or  twenty- 
five  years  behind  Germany  in  perceiving  the  national 
importance  of  social  and  labor  legislation. 

We  in  the  United  States  have  been  more  backward 
in  this  respect  than  any  other  great  industrial  nation, 
partly  because  we  have  had  an  unlimited  supply  of 
immigrants  from  European  countries.  Our  employers 
have  not  felt  the  need  of  conservation  of  labor  because 
labor  was  plentiful.  The  laborers  who  needed  to  be 
conserved  were  very  few,  because  they  already  were 
more  prosperous  than  in  Germany  or  England.  And 
so  employers  have  gone  on  in  a  contented  way, 
believing  that  the  labor  supply  of  the  nation  was 
unlimited.  Relying  upon  our  great  natural  resources 
and  our  inventive  genius  they  have  thought  that  we 
could  stand  up  as  a  nation  without  necessarily  pro- 
tecting our  laboring  people. 

But  now  we  and  all  the  nations  perceive,  as  never 
before,  that  the  next  stage  in  industrial  progress  is 
not  that  economic  revolution  which  Karl  Marx 
predicted,  it  is  not  even  development  in  machinery 
and  tools,  but  it  is  the  increased  production  and 
increased  wealth  of  the  world  which  are  now  dependent 
upon  the  health,  intelligence,  goodwill  of  labor. 
That  nation  which  is  foremost  in  giving  heed  to  the 
health  and  housing,  the  vocational  education,  secu- 
rity and  wages  of  its  working  people  will  be  the 
nation  which  will  survive  even  in  times  of  peace. 
How  much  greater  the  need  in  war  time  of  a  strong, 
healthy,  and  intelligent  working  people ! 

Another  thing  that  Karl  Marx  overlooked  was  the 
political  power  of  capitalism.  According  to  all  that 


THE  WORLD  193 

he  could  see  at  that  time,  the  progress  of  industry 
consisted  in  the  big  capitalists  driving  the  small 
capitalists  out  of  business  and  absorbing  the  bu.<in«-.--. 
In  the  final  outcome  it  would  naturally  follow  that  a 
few  big  capitalists  would  own  all  the  industries,  and 
then  it  would  be  a  very  easy  matter  for  the  expropri- 
ated wage-earners  simply  to  take  possession. 

But  he  did  not  know  the  possibilities  of  the  modern 
corporation.  There  were  at  that  time  very  few 
corporations  in  existence.  The  modern  corporation 
has  diffused  capitalism  throughout  large  masses  of 
people  by  building  up  a  system  of  stocks  and  bonds,  of 
savings  banks  and  insurance  companies,  and  millions 
of  people  who,  under  the  old  Marxian  theory,  would 
have  been  expropriated,  have  become  themselves 
members  of  the  propertied  and  capitalist  class. 

The  political  power  of  capitalism  was  demonstrated 
in  Germany  more  fully  than  anywhere  else  in  the 
world.  For  no  other  nation  had  gone  to  the  limit 
reached  by  Germany  in  subsidizing  its  exporters  and 
importers,  in  subsidizing  banks  that  had  their  ramifi- 
cations throughout  the  world,  in  subsidizing  syndicates 
of  all  kinds  which  enabled  the  German  capitalist  to 
spread  his  markets  throughout  the  world,  in  pur- 
chasing railroads,  building  canals,  and  giving  manu- 
facturers differential  advantages  in  order  that  they 
might  drive  competitors  from  other  markets.  The 
German  government  allied  itself  with  capitalists, 
and  made  a  science  of  "  dumping " — dumping  their 
products  by  underselling  manufacturers  of  other 
countries,  and  recouping  the  losses  from  taxes  on  the 
German  people.  Having  destroyed  competitors  in 
foreign  countries,  they  could  perhaps  get  control  of 

13 


194  INDUSTRIAL  GOODWILL 

those  markets,  and  establish  German  monopoly. 
This  tremendous  power  of  modern  business,  which 
showed  its  largest  fruit  in  the  capitalistic  socialism  of 
the  German  Empire,  is  something  that  Karl  Marx 
did  not  foresee. 

These  are  the  grand  national  and  social  forces  which 
have  come  into  existence  since  the  time  of  the  Com- 
munist Manifesto,  and  have  nullified  what  otherwise 
might  have  been  accurate  predictions  of  that  Manifesto. 
For  Karl  Marx  had  based  his  calculations  upon  the 
purely  mechanical,  economic  evolution  of  machinery, 
of  tools,  of  markets,  of  supply  and  demand.  He  had 
not  weighed  these  spiritual  and  psychological  forces 
which  have  revolutionized  the  modern  world.  He  had 
not  seen  beneath  the  economic  forces.  He  had  not 
seen  the  power  of  patriotism  by  virtue  of  which  the 
divers  classes  of  these  different  nations  would  finally 
unite.  He  had  not  seen  the  movement  of  trade 
unionism  through  which  laborers  learned  to  organize, 
learned  self-control,  learned  to  negotiate  with  em- 
ployers, learned  that  they  need  not  fall  back  into  the 
pauper  condition  that  Marx  predicted,  but  that  by 
negotiation,  by  arbitration,  they  might  make  an 
agreement  with  the  capitalists,  that  they  might  come 
to  terms  with  the  capitalists  and  divide  the  product 
between  them. 

The  spirit  of  trade  unionism,  instead  of  being  that 
of  class  struggle,  is  the  spirit  of  partnership.  The 
trade  union  movement  looks  upon  itself,  not  as  the 
irreconcilable  opponent  of  capitalism,  but  as  a  mem- 
ber of  the  family.  Being  a  member  of  the  family  it  is 
entitled  to  have  a  row  with  the  head  of  the  family,  and 
to  live  apart  for  a  time,  but  it  has  not  yet  taken  out  a 


THE  WORLD  195 

divorce.  Trade  unionists  do  not  presume,  as  Karl 
Marx  did,  that  the  members  of  the  family  can  do 
without  the  head  of  the  family.  Trade  unionism  is 
based  upon  that  principle  of  partnership  which  we  see 
in  a  different  way  in  the  home.  Consequently  here 
we  have  a  spiritual  movement  which  has  not  attacked 
family,  religion,  and  property,  as  Karl  Marx  had  done, 
but  has  organized  itself  to  get  a  larger  share  of  profits 
by  negotiation,  by  agreement,  by  strikes. 

In  America,  when  the  war  came  on,  the  socialists 
and  their  anarchistic  partners,  the  Industrial  Workers 
of  the  World,  promptly  took  the  side  of  Karl  Marx 
with  his  theory  of  internationalism  and  were  willing  to 
let  Germany  win.  The  trade  unions  just  as  promptly 
took  the  side  of  America.  Both  had  similar  grievances 
and  similar  aims.  Both  wanted  more  wages  and 
shorter  hours  of  labor  and  better  conditions  of  labor. 
Both  were  organized  to  fight  the  capitalists. 

But  there  was  a  world  of  difference.  Nearly  3,000- 
000  wage-earners  were  organized  in  trade  unions. 
Their  employers  recognized  them  and  dealt  with 
their  representatives.  They  had  already  established 
representative  democracy.  These  3,000,000  wage- 
earners  already  knew  that  they  were  a  part  of  the 
great  American  democracy.  They  knew  that  they 
had  an  equal  voice  and  equal  power  with  capitalism. 

The  socialists,  the  Industrial  Workers  of  the  World, 
the  American  Bolsheviki,  hated  American  capitalism 
and  were  willing  to  see  it  crushed  by  German  capi- 
talism. To  them  all  capitalism  was  but  industrial 
autocracy  and  they  saw  no  difference  between  American 
and  German  autocracy.  They  held  that  capitalism 
the  world  over  must  be  destroyed  and  labor  must 


196  INDUSTRIAL  GOODWILL 

become  the  autocrat.  They  would  have  poisoned  our 
minds  with  hatred  and  would  have  broken  down  our 
spirit  as  they  did  in  Russia  and  nearly  did  in  Italy. 

But  the  trade  union  movement  saved  us.  The 
trade  unionists  had  their  grievances  against  capital- 
ists. They  had  gone  through  many  bitter  fights  and 
were  preparing  for  more.  Not  all  capitalists  would 
recognize  them  or  meet  their  committees.  In  fact, 
only  a  minority  of  the  employers  of  the  country  had 
dealings  with  organized  laborers.  But  it  was  that 
minority  that  saved  us.  If  they  had  been  like  the 
majority  of  employers  then  there  would  have  been  no 
organized  labor  ready  to  resist  and  overcome  the 
socialists,  the  I.W.W.  and  the  other  Bolsheviks  in  our 
midst.  Trade  unionism  justified  itself  and,  next  to 
our  armies  going  to  France,  the  greatest  asset  of 
America  has  been  our  trade  union  movement,  and  the 
greatest  protection  of  American  capitalism  has  been 
the  capitalists  who  dealt  with  trade  unions. 

Karl  Marx  also  overlooked  that  other  spiritual 
force,  that  humanitarian  spirit  which  might  look  upon 
the  hardships  of  labor  as  something  that  should  be 
immediately  cured;  that  spirit  which  has  led  to  the 
marvellous  development  of  social  legislation  in  which 
many  employers  have  taken  the  lead.  It  has  been  the 
example  of  progressive  employers  for  a  hundred  years 
that  has  shown  what  could  be  done.  Then  the  in- 
fluence of  politics  has  come  forward  to  make  universal 
among  employers  that  which  progressive  capitalists 
had  done  voluntarily  in  their  own  factories.  This 
humanitarianism  of  capital,  this  spiritual  force  which 
can  look  forward,  in  a  humanitarian  as  well  as  in  a 
business  way,  to  the  improved  condition  of  the  work- 


nn:  \\<>ULD  197 

ing  population,  this  spiritual  and  social  principle,  he 
did  not  recognize. 

And  now  we  in  this  country,  as  in  all  other  countries, 
are  in  a  position  to  learn  the  lesson  of  history  of  the 
past  seventy  years.     We  can  free  ourselves  entirely 
from  the  idea  that  economic  forces,  that  supply  and 
demand  alone,  are  to  determine  the  destiny  of  this 
nation  or  any  other  nation.     That  destiny  will  be  ) 
determined  by  the  spiritual  forces,  the  forces  of  soli- 
darity, the  forces  of  cooperation,  the  forces  of  partner- 
ship on  the  one  hand  and  struggle  on  the  other.     It  is 
that  nation  which  can  look  forward  and  adjust  itself 
to  these  spiritual  forces,  which  can  properly  place 
before  its  workingmen  the  inducements  of  a  united 
nation,  a  prosperous  country,  and  fair  treatment  of  its 
own  people  and  of  foreign  peoples;  it  is  the  nation  % 
which  can  appeal  to  goodwill  instead  of  to  the  coercive  I 
power  of  the  army,  at  home  and  abroad;  it  is  the  nation  | 
which  realizes  these  great  spiritual  forces  and  rids 
itself  of  purely  economic  and  material  ideals,  that  will 
in  the  long  run  win. 

No  nation  hereafter,  not  even  America,  can  live  to 
itself  alone.  America  has  come  out  of  the  war  the  one 
great  industrial  power  of  the  world.  Other  nations 
are  bankrupt.  America  is  their  creditor.  America 
has  the  capital,  the  resources,  the  shipping,  the  man- 
power. America  may  use  its  power  as  Germany  tried 
to  do.  It  may  subsidize  its  capitalists  and  trusts  and 
make  a  science  of  dumping.  It  may  make  other 
nations  eventually  its  enemies.  Or  it  may  submit  its 
excessive  power  to  be  regulated  in  partnership  and 
equality  with  other  free  nations.  The  struggles  of  the 
future  are  industrial.  The  world  may  be  governed 


198  INDUSTRIAL  GOODWILL 

by  supply  and  demand,  and  America  will  win  by 
superior  control  over  supply.  Or  the  world  may  be 
governed  in  partnership  and  America  will  take  an 
equal  chance  of  winning  in  the  race  of  international 
goodwill. 


777 A'   WORLD 


REFERENCES 

COMMONS,  J.  R.,  Labor  and  Admini.st ration,  New  York,  (1013). 
COMMONS  AND  ANDREWS,  Principles  of  Labor  Legislation,  New  York, 

(1916). 
COMMONS  AND  ASSOCIATES,  History  of  Labor  in  the  United  State*, 

2  vol.,  New  York,  (1918). 

DEWET,  JOHN,  Democracy  and  Education,  New  York,  (1917). 
ELY,  R.  T..  World  War  and  Leadership  in  a  Democracy,  New  York, 

(1918). 

ESTEY,  J.  A.,  Revolutionary  Syndicalism  in  France,  London,  (1913). 
GROAT,  G.  G.,  Organized  Labor  in  America,  New  York,  (1916). 
HILQUIT,  MORRIS  AND  RYAN,  JOHN  A.,  Socialism,  Promise  or  Menace, 

New  York,  (1917). 

HOXIE,  R.  F.,  Scientific  Management  and  Labor,  New  York,  (1915). 
HOXIE,   R.  F.,  Trade  Unionism  in  the  United  States,  New  York, 

(1917). 

KELLY,  R.  W.,  Hiring  the  Worker,  New  York,  (1918). 
LESCOHIER,  D.  D.,  The  Labor  Market,  New  York,  (1919). 
Profit  Sharing  in  the  United  States,  Bulletin  208,  U.  S.  Bureau  of 

Labor  Statistics,  (1916). 

RUBINOW,  I.  M.,  Standards  of  Health  Insurance,  New  York,  (1916). 
SCHNEIDER,  HERMAN,  Education  for  Industrial  Workers,  New  York, 

(1915). 
SLIGHTER,  SUMNER,  The  Turnover  of  Factory  Labor,  New  York, 

(1919). 
Social  Insurance,  Proceedings  of  the  Conference  on,  Bulletin  212, 

U.  S.  Bureau  of  Labor  Statistics,  (1917). 
TAYLOR,   FREDERICK  W.,  The  Principles  of  Scientific  Management, 

New  York,  (1911). 
WEBB,  S.  &  B.,  The  History  of  Trade  Unionism,  New  York,  (1911). 

Periodicals 

AMERICAN  FEDERATIONIST,  Washington,  D.  C. 
MONTHLY  REVIEW,  U.  S.  Bureau  of  Labor  Statistics 
INDUSTRIAL  MANAGEMENT,  New  York. 


INDEX 


Accidents,  cause  of,  62;  cost  of,  50,  53,  56,  59,  60;  group  responai 

for,  54,  55,  67,  191;  and  industrial  insurance,  83,  89;  laws  for,  183; 

as  part  of  industry,  56,  92,  153;  prevention  of,  59,  121,  152,  153; 

public  interest  in,  53,  55,  162. 
Adair  v.  United  States,  see  Law  cases. 
Aliens,  126. 
America,  place  in  world  of,   197,    198;  Revolution,   127.     See  also 

Labor;  United  States. 

American  Association  for  Labor  Legislation,  97n. 
American    Federation  of  Labor,  39,   43n;  authority  of,   116,    117; 

benefits  in,  83;  membership  of,  172;  and  National  War  Labor 

Board,  41,  119;  Proceedings,  76n,  83n,  134n,  172n;  cost  of  strikes 

in,  83;  unemployment  in,  76. 
American  Federationist,  70n. 
American  Labor  Legislation  Review,  82n. 
American  Labor  Mission,  130. 

American  Statistical  Association,  Quarterly  Publications  of,  169n. 
Americanization,  127-131,  163. 
Anarchism,  30,  39,  102,  143,  189;  in  America,  195;  and  democracy, 

37,  43,  46,  185;  in  Europe,  171,  174. 
Annalist,  170n,  172n. 
Apprenticeship,  16,  121,  136,  151,  154,  160;  and  education,  131-133, 

135,  136;  in  Wisconsin,  131,  132.     See  also  Continuation  schools; 

Education. 

Arbitration,  board  of.     See  Shop  committees. 
Arizona,  alien  law  in,  126. 
Arts  and  crafts,  144,  145. 
Associations,  of  capital,  47,  48,  113-117,  125,  131,  178,  182;  of  labor, 

47,  48,  113-115,  117,  125,  179,  182.     See  also  Capitalism ;  Partner- 
ship; Trade  unionism. 
Austria,  188.     See  also  Europe. 
Autocracy,  capitalism  as,  195;  and  democracy,  40,  108;  in  18th  and 

19th  centuries,  127;  in  20th  century,  127,  128;  theory  of,  63. 
201 


202  INDEX 

B 

Baker's  case,  see  Law  cases. 

Baldwin,  F.  Spencer,  91n. 

Bargaining  power,  22-24,  78;  collective,  118,  119,  121,  165;  equality 

of,  35,  47;  inequality  of,  32-34,  46;  new  spirit  of,  114;  psychology 

of,  69. 

Base  rate,  11,  12. 
Basic  hour  day,  67,  69-71. 
Benefits,  class,  30,  33;  funeral,  83,  84,  88,  95;  private,  30,  33;  public, 

30,  32,  33,  41,  45;  sick,  83,  93-96,  98-100;  workers',  32,  88.    See 

also  Insurance. 

Beveridge,  W.  BL,  Unemployment,  75n. 
Bismarck,  Prince,  190,  191. 
Bolsheviki,  195,  196. 

Bonus  rate,  10-13;  system,  103,  104,  148,  158,  159. 
Brandeis,  Louis,  35. 
British  Labor  Party,  181. 
Bureaucracy,  41,  80,  81,  139. 
Business,  education  in,  140-142;  regularization  of,  66,  67;  risks  in,  51, 

52,  54-56. 


Capitalism,  as  autocracy,  195;  disappearance  of,  187, 189;  in  Germany, 
193,  194;  and  goodwill,  73,  178;  ideal  of,  185;  in  industry,  187, 
192,  193;  politicians  under,  174,  175;  problem  of,  140;  spread  of, 
187,  193;  and  unionism,  45,  48,  81,  113,  194,  196.  See  also 
Associations. 

Carnegie,  Andrew,  163,  178. 

Casualty  Actuarial  and  Statistical  Society,  84n. 

Chandler,  W.  L.,  95n. 

Character,  33. 

Chartism,  171. 

Chilicothe  (Ohio)  cantonment,  76,  77. 

Citizenship,  foundation  of,  132;  rights  and  duties  of,  127-129. 

Civil  service,  and  employment  office  system,  79,  80. 

Civil  War,  127,  171,  174. 

Class  struggle,  24,  30,  47,  58,  175,  188,  197;  becomes  harmony,  27,  90, 
171,  194;  inevitable,  38,  39,  197;  reconcilable,  39,  80,  89;  and 
separation  of  government,  184. 

Cleveland,  associated  employers  of,  131. 

Closed  shop,  7,  44,  45. 


INDEX  203 

Coercion,  34,  45,  143,  140,  150,  ir.l,  197. 

Colorado  Fuel  and  Iron  Company,  111,  112n. 

Colorado,  legislature  of,  31;  State    Industrial    Commission   of,    112; 

Suprrme  Court  of,  32. 

Commission  on  Industrial  Relations,  final  report  of,  82n,  184n. 
Committee  on  Public  Information,  43n. 
Commodity  theory  of  labor,  1-6,  17,  25,  63,  166,  192,  197. 
Common  law,  49,  54,  55. 

Commons,  J.  R.,  Labor  and  Administration,  40n,  14 In,  184n;  Propor- 
tional Representation,  40n;  Trade  Unionism  and  Labor  Problem*, 

8n,  lOn,  69n. 
Commons  and  Andrews,  Principles  of  Labor  Legislation,  36n,  70n,  82n, 

97n,  182n,  184n. 
Commons  and  Associates,  History  of  Labor  in  the  United  States,  116n, 

169n,  171n,  189n. 

Communist  Manifesto,  187,  187n,  190,  194. 
Compensation,  workmen's,  54,  55,  57,  59,  101,  162,  183;  in  Germany, 

191;  and  insurance,  86,  89,  90;  in  New  York,  55;  in  Wisconsin, 

49-51. 
Competition,  18,  19,  24,  25,  27,  29,  68,  69,  103,  115,  185;  cut-throat, 

28,  57,  90,  101;  and  goodwill,  26,  27,  102,  133;  kinds  of,  28,  57, 

193. 

Congress,  see  United  States. 
Conservation,  of  resources,  128-130,  192. 

Continuation  schools,  132-141.     See  also  Apprenticeship;  Education. 
Coppage  v.  Kansas,  see  Law  cases. 


Day  work,  and  piece  work,  7,  8. 

Declaration  of  Independence,  126. 

Demand  and  supply,  law  of,  17,  33,  56,  65,  76,  128,  129,  165,  166,  197; 
theory  of  labor,  see  Commodity  theory  of  labor.  See  also 
Labor;  Prices;  Wages. 

Democracy,  and  anarchism,  37,  43,  46,  185;  and  autocracy,  40,  108; 
basis  of,  113;  conservative,  122,  123;  education  in,  108,  109,  111- 
113,  130;  in  education,  see  Education;  and  efficiency,  42,  79,  80; 
in  industry,  39,  40-43,  46-48,  51,  59,  79,  80,  111,  117,  1'J- 
136,  139,  147,  166,  180,  195;  and  personality,  152;  in  politics,  30, 
40,  139,  180;  problem  of,  129,  130;  and  socialism,  38,  43,  46,  185; 
spirit  of,  121,  124,  125,  185;  and  World  War,  127,  128. 
Partnership. 


204  INDEX 

Depression,  168-186;  after  1837,  31,  171,  188,  189;  after  1861,  171; 
after  1918,  173,  174;  cycles  of,  66,  71,  72,  168;  and  government, 
184, 186;  labor's  share  in,  68,  70,  87, 174, 176;  and  labor  turnover, 
25. 

Detroit,  associated  employers  of,  131. 

Dewey,  John,  Democracy  and  Education,  139n,  141n. 

Dicey,  Law  and  Opinion  in  England,  37n. 

Disability,  85,  86,  88-90,  95,  98,  100,  104,  191.     See  also  Insurance. 

Discipline,  in  shop,  106,  107,  122. 

Division  of  labor,  2,  16,  144,  145,  154. 

"Due  process  of  Law,"  35,  55,  109,  125,  165,  167. 

Duffy,  Thomas  J.,  91n. 

"Dumping,"  193,  197. 

Duties,  see  Rights  and  duties. 

E 

Earnings,  see  Wages. 

Education,  democracy  in,  136,  139;  in  democracy,  see  Democracy; 

department  in  industry,  155,  156;  duties  of,  128-131,  139,  140; 

in  public  schools,  132,  136,  138. 
vocational,  132-134,  138-140,  142,  149,  150,  153-155,  190,  192; 

and  apprenticeship,  131-133,  135,  136;  characteristics  of,  136, 

137,  140,  141;  continuation  schools,  132-141;  control  of,  134-136, 

138,  139,  142;  in  England,  137,  138;  Federal  Board  for,  135n; 
Federal  Law,  135, 138;  in  Germany,  135, 137, 138, 191 ;  and  school 
teacher,   134,   139,   156.    See  also  Labor;  Smith-Hughes  Act; 
Vestibule  school. 

Efficiency,  in  industry,  72,  102,  103,  124,  140,  156,  165,  185. 

"Emergency  squadron,"  67. 

Employers,  associations  of,  47,  48,  113-116,  125,  131,  178,  182;  as 

educators,  13 1-1 34;  and  hours  of  labor,  129,  130;  as  learners,  109; 

as  pioneers,  29. 

Employment,  department,  see  Labor  department, 
managers,  1,  2,  88,  152,  160,  164,  166,  167;  Association  of  Boston, 

17;  Conference,  Proceedings  of,  158n. 
offices,  74,  75;  federal  system  of,  79,  81, 185;  in  Ohio,  76,  77;  private, 

5,  77,  78,  81,  82;  public,  78-81,  146;  sidewalk,  2. 
regularization  of,  65-67,   71,  72,  81;  security  of,  65-73;  Service 

Bulletin,  82n.     See  also  Labor. 
Engineer's  theory  of  labor,  see  Machinery  theory. 
England,  Chartism  in,  171;  Carton  Foundation  of,  137n;  labor  in,  114, 

180,  181;  Labor  Party  in,  181 ;  legislation  in,  117,  117n,  190,  192; 


20.1 

Parliament  in,  180-182;  reconstruction  in,  181-183;  shop  com- 
mittees in,  118,  119,  181,  182;  and  slavery,  34;  and  vocational 
education,  137,  138;  in  World  War,  117,  117n,  118,  125,  175,  17fl. 

English  language,  in  industry,  131,  137;  value  of,  126;  in  Wisconsin 
schools,  127. 

Establishment  funds,  85,  87,  91,  100.     See  also  Insurance 

Estey,  J.  A.,  Revolutionary  Syndicalism,  18 In. 

Europe,  anarchism  in,  171,  174;  labor  in,  174,  175,  179,  187;  prices  and 
wages  in,  171;  re  volutions  in,  174,  188,  189;  socialism  in,  171,  174; 
in  World  War,  174,  175.  See  also  Austria;  France;  Germany; 
Hungary;  Italy. 


Facts  and  theories,  62-64,  71,  72,  166,  167,  176,  178,  180,  185. 
Federal  Trade  Commission,  28. 
Filene,  E.  A.,  113n. 
First  aid,  154. 
Fisher,  Irving,  92n. 
Food,  control  of,  173. 
Ford  Motor  Company,  18. 

France,  Confederation  of  Labor  of,  181 ;  government  in,  181 ;  Revolu- 
tion, 37,  127;  in  World  War,  125,  191,  192.     See  also  Europe. 
Freund,  E.,  Standards  of  American  Legislation,  47n,  56n. 
Fuel  Administration,  42. 


Germany,  anti-socialist  law  of,  191;  capitalism  in,  193,  194;  govern- 
ment in,  180;  and  labor  legislation,  190-192;  policy  of,  193,  197; 
struggles  in,  188,  190;  trade  unionism  in,  180,  189,  190;  vocational 
education  in,  135,  137,  138,  191;  in  World  War,  125,  131,  191, 
192,  195,  197.  See  also  Europe. 

Gide  and  Rist,  History  of  Economic  Doctrines,  56n. 

Gilds,  15,  16. 

Goodwill,  advance  in,  89,  148;  and  bargaining  power,  19,  24,  26,  110, 
115;  and  capitalism,  73,  178;  and  class  harmony,  27,  28,  186; 
commercial,  25,  26,  28,  66;  competitive  persuasion,  24,  45,  46,  74, 
88,  115,  145,  146;  incorporation,  20,  151,  153,  154,  156,  160,  186, 
192,  197;  as  cost,  17,  96;  credit,  26;  as  good  reputation,  18,  103; 
in  government,  186;  importance  of,  28,  65,  161;  industrial,  19, 
26,  45,  63,  65,  67,  75,  109,  146,  148,  160,  165;  from  insurance,  87, 
89;  as  intangible  asset,  25,  26,  95,  96;  international,  197,  198;  and 


206  INDEX 

legislation,  29,  53,  67,  125,  162;  V esprit  de  corps,  20,  96;  and 

liberty,  24;  and  loyalty,  148-150,  156;  nature  of,  19,  26,  53,  149, 

192;  as  personality,  20,  151-156;  as  reciprocity,  19,  27,  113,  179; 

and  safety,  60,  102;  scientific,  18,  20,  25,  73;  and  security,  73; 

substitutes  for,  24,  162;  theory  of  labor,  17-27,  63,  65, 166;  value 

of,  20,  21,  25,  26,  53,  74. 
Government,  attacked,  187;  goodwill  in,  186;  labor  legislation  and, 

123,  183,  184;  separation  of,  180,  182-185. 
Greenbackism,  171,  174. 


Halsey,  F.  S.,  8,  9,  lOn,  11,  13. 

Hard  times,  see  Depression. 

Harmony  of  interests,  10,  28,  39,  41-43,  51,  58,  105. 

Hart,  Shaffner  and  Marx  Labor  Agreement,  109n. 

Health,  of  army,  92,  104,  105;  and  demand  and  supply  law,  129;  in- 
vestigations, 35,  92;  as  public  purpose,  32,  33,  35,  93-97,  101,  102, 
105,  129,  152,  161,  165,  192;  value  of,  154,  192.  See  also  Insur- 
ance; Labor. 

Hiring  and  firing,  2,  23,  48,  65,  76,  107,  143,  145,  149,  161. 

Hitchman  Coal  and  Coke  Company  v.  John  Mitchell,  see  Law  cases. 

Holden  v.  Hardy,  see  Law  cases. 

Homestead  strike,  178. 

Hoover,  Herbert,  39,  41. 

Hours  of  labor,  of  bakers,  33;  in  basic  hour  day,  67,  69-71 ;  control  of, 
129,  130,  182;  and  disability,  103;  first  legislation,  190;  of  immi- 
grants, 128;  in  mines  and  smelters,  32;  in  past,  151;  and  piece 
rates,  70;  Robert  Owen  and,  29;  seasonal,  67-71,  185;  and  trade 
unionism,  70,  71,  173,  189,  195;  in  Wisconsin,  29. 

Hoxie,  R.  F.,  21,  21n,  157. 

Hungary,  188.    See  also  Europe. 


Illinois,  safety  laws  of,  183. 

Illwill,  52,  81,  96. 

Immigrant  labor,  1-4,  108,  127,  128,  130,  192.     See  also  Labor. 

Individualism,  30,  37,  102. 

Industrial  Management,  95n. 

Industrial  Workers  of  the  World,  195,  196. 

Industry,  capitalism  in,  187,  192,  193;  control  of,  173,  174;  fluctua- 
tions in,  71,  72;  future  of,  140,  141;  goodwill  in,  19,  26,  45,  63,  65, 
67,  75,  109,  146,  148,  160,  165;  interest  in,  13&-141,  143-150, 


INDEX  207 

164-168,  160;  loyalty  in,  125,  143-160,  166,  160;  psychology  in, 
11,  16,  140,  148,  152;  stagnation  in,  8;  unreal  in,  1,  2,  168. 

Inglis,  Alexander,  Principles  of  Secondary  Education,  138n,  139n. 

Insurance,  accident,  64,  55,  57,  59,  98,  121,  122;  group,  84-91,  98,  100; 
health,  92,  94,  96-105,  121,  122,  191;  industrial,  83,  84;  sic  knew, 
85,  86,  191;  and  workmen's  compensation,  86,  89,  90;  YearBook, 
83n.  See  also  Benefits ;  Disability ;  Establishment  funds ;  Health ; 
Pensions,  old  age;  Sickness. 

Inter- Mountain  Educator,  139n. 

Internationalism,  187,  188,  195. 

Italy,  188;  in  World  War,  191,  196.     See  also  Europe. 

Ives  v.  South  Buffalo  Railroad  Company,  tee  Law  caaes. 


Journal  of  Political  Economy,  42n. 
Judicial  opinion,  31,  34-36,  44-48,  184. 


Labor,  American  and  European,  31;  Commissioner  of,  report,  83n; 
contract,  22-24,  26,  27,  45,  46,  77, 159;  department,  106,  107,  109, 
157,  158,  160,  162,  164,  165;  division  of,  2,  16,  144,  145,  154;  as 
force,  35,  129;  investigation  of,  35;  market,  1,  2,  5,  27,  66,  74,  76- 
78,  89,  101;  Policies  Board,  186;  politicians,  174,  175;  and  prices, 
171;  problem,  22,  24,  140,  141,  165;  recruiting  of,  74-82;  Secre- 
tary of,  41,  79;  theories  of,  1-36,  62-65,  166,  192,  197;  turnover, 
17,  18,  20,  25,  65-67,  74,  85,  87,  96,  145,  153. 
legislation,  constitutional,  32,  34;  development  of,  33,  36,  63,  190; 
in  England,  117,  117n,  190,  192;  in  Germany,  190-192;  and 
goodwill,  29,  63,  57,  125,  162;  and  government,  123,  183,  184; 
public  purpose  of,  36,  192,  196;  unconstitutional,  29,  31-34,  116. 
See  also  America;  Demand  and  supply;  Education;  Employment; 
Health;  Immigrant  labor;  Safety;  Scientific  management. 

Laborer  as  customer,  18. 

Land  agents,  5. 

Law  cases  cited,  Adair  v.  United  States,  47n,  48n;  Coppage  v.  Kansas, 
47n,  48n;  Hitchman  Coal  and  Coke  Company  v.  John  Mitchell, 
44n,  46n,  48n,  184;  Holden  v.  Hardy,  31,  31n,  34,  35;  Ives  v. 
South  Buffalo  Railroad  Company,  55n;  Lochner  v.  New  York 
(baker's  case),  32,  33n;  Nekoosa -Edwards  Paper  Company  v. 
Mittie  Smith,  50n;  David  Smith  Company  v.  Clausen,  66n; 
Truax  v.  Raich,  126n. 


208  INDEX 

League  of  Nations,  173. 

Leiserson,  W.  M.,  76n. 

Liberty,  26,  34,  35,  37,  43,  58,  72,  87,  90,  109,  123,  127,  128,  152,  164, 

166. 

Lochner  v.  New  York,  see  Law  cases. 
Loyalty,  125,  143-150,  156,  160. 

M 

Machinery  theory  of  labor,  7-17,  62,  63,  166. 

Malingering,  99,  100. 

Mangold,  George  B.,  31n. 

Manufacturers,  National  Association  of,  133n. 

Marot,  Helen,  Creative  Impulse  in  Industry,  14 In. 

Marshall,  L.  C.,  The  War  Labor  Program  and  Its  Administration,  42n. 

Marx,  Karl,  187-190,  192,  194-196. 

Merchant's  theory  of  labor,  see  Commodity  theory. 

Metropolitan  Life  Insurance  Company,  92n. 

Migratory  workers,  5. 

Miller,  H.  L.,  139n. 

Milwaukee  Electric  Railway  and  Light  Company,  95n. 

Mine  Workers  of  America,  United,  42. 

Minimum  wage,  9,  10,  12,  147,  190;  boards,  182. 

Morris,  E.  B.,  Group  Life  Insurance  and  Its  Possible  Development,  84n. 

Morris,  Willian,  144n. 

"Mysteries,"  15,  16. 

N 

National  Industrial  Conference  Board,  41,  116n,  117,  119. 
National  War  Labor  Board,  41,  42,  70n,  117n,  119,  120,  120n. 
Nekoosa-Edwards  Paper  Company  v.  Mittie  Smith,  see  Law  cases. 
New  York,  bakers'  case,  32;  Department  of  Labor  Bulletin,  76n; 

Federation  of  Labor,   91n;   Industrial  Commission,    170,    183; 

Legislature,  9 In;  Senate,  health  insurance  bill  in,  97n;  workmen's 

compensation  in,  55. 


Official  Bulletin,  41n,  42n,  44n,  117n,  120n. 

Ohio,  State  Industrial  Commission,  9 In,  184;  unemployment  in,  76,  77. 

Output,  7,  10,  17,  25,  67,  71,  96,  153,  155,  158,  166. 

Owen,  Robert,  29. 


INDEX  20ft 

P 

Pacifism,  187. 

Parliament  in  England,  180-182. 

Partnership,  between  classes,  42,  43,  51,  52,  66,  69,  80,  81,  10,1. 

194,  197;  between  individuals  in  class,  56,  157,  158,  176,  194,  195; 

between  nations,   173,   197,  198;  theory  of,  63,  166.     See  also 

Associations;  Democracy;  Solidarity. 

Patriotism,  30,  97,  128.  166,  173,  175,  178,  184,  187,  188,  194. 
Pensions,  old  age,  85,  86,  88,  89,  95,  98,  100,   104,   191.     See  aUo 

Insurance. 
Personality,  creation  of,  159-162, 167,  176;  of  employee,  122,  163,  164; 

of  employer,  114,  115,   122,  153-156,  158,  160,  163,    164;  and 

individuality,  151.  160;  as  profession,  161-165;  as  reasonableness, 

122,  167,  176;  required  in  modern  business,  151,  152,  159-161, 

163-165;  as  specialization,  151,  152,  160;  substitutes  for,  159, 162. 
Personnel  department,  see  Labor  department. 
Persuasion,  45,  59,  152. 
Piece  rates,  7,  121,  157-159;  in  clothing  trades,  69,  123,  124;  cutting 

of,  8,  9,  11;  differential,  9-12,  70;  and  hours  of  labor,   70;  and 

labor  cost,  20. 
work,  and  day  work,  7,  8;  evils  of,  103,  104,  159;  and  labor  coat,  7- 

rates  and  hours  in,  70;  system,  7,  9,  14,  103,  104;  as  task -and; 

bonus  system,  12. 

Podmore's  life  of  Robert  Owen,  29n. 
Power,  26,  34,  35,  43,  151,  162-164. 
Premium  system,  8-11,  13,  103,  104,  148,  157, 158. 
Prices,  in  clothing  trades,  69;  under  competition,  23,  24,  28,  30,  57,  68, 

128,  129,  159;  movement  of,  168,  173;  and  profits,  168,171;  retail, 

168,  170;  of  wheat  fixed,  39,  40;  wholesale,  168-172.     See  also 

Demand  and  supply. 
"Principal  and  agent,"  47,  48,  177,  178. 
Profits,  18,  22,  26,  38,  58-61,  130,  158,  168,  171,  173,  187,  195. 
Profit-sharing,  70. 

Progress,  35,  105,  123,  156,  180,  192,  193. 
Property,  25,  26,  33,  34,  38,  55,  143,  166,  187. 
Prosperity,  25,  61,  168,  171,  173-175,  184,  186. 
Provost  Marshal  General,  report,  92n,  126n. 
Prudential  Insurance  Company,  84n. 
Psychology,  in  industry,  see  Industry. 
Public  opinion,  30,  31,  33-35,  89, 117, 132;  utility,  42-48;  utility  theory 

of  labor,  28-36,  63,  166. 
"Public,  The,"  28-36,  42,  43,  63. 
14 


210  INDEX 

Q 

Quarterly  Journal  of  Economics,  42n. 

R 

Rate-fixing,  14. 

Reasonable  classification,  32,  64. 

Reasonableness,  122,  125,  167. 

Reconstruction,  181-183;  Ministry  of,  181. 

Renold,  C.  G.,  122n. 

Repetition  work,  146-148. 

Responsibility,  individual,  50-52,  55;  common  law  theory  of,  54,  56, 

58;  criminal  theory  of,  53,  54. 
group,  54-57. 

Revolution,  113,  143,  171,  187,  192;  American,  127;  Europe,  174,  188, 
189;  French,  37,  127;  Russian,  38. 

Rights  and  duties,  33,  47,  127-132,  138,  139,  166. 

Risks  in  business,  see  Business. 

Rockefeller,  John  D.,  Ill,  163;  plan  112,  112n.     See  also  Shop  com- 
mittees. 

Roelse,  H.  V.,  169n,  172n. 

Ross,  E.  A.,  Russia  in  Upheaval,  38n. 

Rubinow,  I.  M.,  Social  Insurance,  84n,  92n,  97n. 

Russia,  175;  Revolution,  38;  sovyets  in,  181;  in  World  War,  191,  196. 

S 

Safety,  53,  122,  162;  Council,  National,  59,  59n;  in  Illinois,  183; 

mechanical,  59,  152,  153;  profession  of,  59-61,  152,  153,  160; 

spirit  of,  59,  153,  161.    See  also  Labor. 
Schneider,  Herman,  14  In. 

Science  of  Management,  Bulletin  of  the  Society  to  Promote  the,  158n. 
Scientific  management,  12,  13,  15-19,  21,  22,  25,  65,  73,  110,  156-158. 
manager,  21-23,  152,  157,  158,  160.     See  also  Labor;  Time-and- 

motion  studies. 

Seasonal  trades,  wages  in,  65,  68,  69. 
Security,  65-73,  192. 

Service  department,  see  Labor  department,  worker,  152,  167. 
Shipping  Board,  42,  137n. 
Shop  committees,  in  England,  118,  119,  181,  182;  importance  of,  125; 

machinery  of,  107, 123, 124, 160;  in  Rockefeller  interests.  111.  112; 

as  "shop  stewards,"  118,  180,  181;  test  of,  121, 122. 


INDEX  211 

"Shop,  The,"  106-125;  democracy  in,  108,  109,  179;  discipline  in,  10«, 

107,  115,  117;  leaders  in,  178,  179;  organization  in,  113,  1U,  IK, 

personality  in,  154,  165,  164. 
Sibley  Journal  of  Mechanical  Engineering,  8n. 
Sickness,  cost  of,  92;  and  industrial  insurance,  84;  and  loss  of  work, 

92,  93,  103;  and  piece  work  system,  104;  prevention  of,  94,  102, 

103,  121,  122;  and  wages,  94,  95.     See  also  Insurance. 
Slichter,  Sumner,  21n,  67n. 

Smith  Company,  David,  v.  Clausen,  see  Law  cases. 
Smith-Hughes  Act,  135n.     See  also  Education. 
Socialism,  30,  38,  39,  43,  72,  112,  143,  171,  174,  179,  187,  189,   195; 

in  Germany,  180,  188,  190,  191,  194. 
Solidarity,  49-61;  of  individuals  in  class,  18,  19,  56,  58,  103,  178;  of 

labor  and  capital,  61,  101,  102;  theory  of,  51-53,  55,  63,  166,  197 

See  also  Partnership. 
Stocks  and  bonds,  20,  26,  193. 

Strikes,  2-4,  69,  106,  111,  113,  117-120,  162,  171,  173,  178. 
Subsidizing,  193,  197. 
"Suggestion  system,"  155. 

Supreme  Court  of  United  States,  32,  34,  35,  48,  126,  184. 
Survey,  76n,  112n,  122n. 
Sydenstricker,  E.,  84n,  92n,  lOOn. 
Syndicalism,  30,  174,  179. 
System,  113n. 


Taft,  William  H.,  41,  44. 

Tariff,  protective,  31,  171,  174. 

Task,  11-13,  19,  157. 

Taylor,  Frederick,  12,  13,  21. 

Theories  and  facts,  see  Facts. 

Time-and-motion  studies,  14-16,  19,  21,  123,  124.     See  also  Scientific 
management. 

Trade,  board,  see  Shop  committees;  marks,  25;  name,  25;  reputation, 

25;  schools,  131,  132. 

unionism,  agreements  under,  67,  123,  124,  194,  195;  in  America, 
112,  114,  116,  171,  189;  and  capitalism,  45,  48,  81,  113,  194-196; 
and  discipline,  106;  in  England,  114,  171,  189;  in  France,  181, 
189;  in  Germany,  180,  189;  and  hours  of  labor,  70,  71,  173,  189, 
195;  and  insurance,  89,  90,  98-100;  Karl  Marx  and,  188,  189,  194; 
leaders  in,  1,  2,  89,  90,  117,  152,  174-176;  organization  of,  44, 
119,  171,  179,  180,  187;  power  of,  87,  116,  123,  144,  189,  194; 


212  INDEX 

purpose  of,  45,  46,  190;  in  Russia,  181;  and  wages,  68,  71,  106 
173,  189;  in  World  War,  195,  196.     See  also  Associations. 
Truax  v.  Raich,  see  Law  cases. 

U 

Unemployment,  2,  70,  72, 103, 143, 149, 168, 174, 189;  and  advertising, 
76-78;  distribution  of,  70,  71,  176,  186;  extent  of,  75,  76,  78;  in 
Ohio,  76,  77;  and  prices,  69,  168,  171;  problems  of,  185. 

United  States,  anarchism  in,  195;  army,  92,  126,  196;  Congress  of,  28, 
39,  40, 123,  183;  Constitution  of,  23,  108,  166;  government  in,  180, 
182,  185,  186;  politics  in,  183;  prices  and  wages  in,  169,  170; 
public  opinion  in,  34;  rights  and  duties  in,  127-130;  Statutes  at 
Large,  123n;  Supreme  Court,  32,  34,  35,  48,  126,  184. 
labor  in,  Department  of,  170,  186;  leaders,  174-176,  180;  Policies 
Board,  186;  Statistics  Bureau  of,  publications,  76n,  84n,  92n, 
lOOn,  119n,  158n.  182n;  supply,  192.  See  also  America. 

Utah,  legislature  of,  31;  Supreme  Court  of,  32. 


Vestibule  school,  155,  160.     See  also  Education. 
Vocation  Bureau  of  Boston,  17. 
Vocational  education,  see  Education. 
Vocational  summary,  135n. 

W 

Wages,  and  earnings,  2,  65, 168, 173;  increase  of,  1,  18,  30,  56,  88,  131; 
interest  in,  157,  158,  185,  192,  195;  movement  of,  28,  31,  65,  66, 
68,  69, 88, 173;  and  prices,  168;  reduction  of,  1,  69, 176;  in  seasonal 
trades,  65,  68,  69;  and  sickness,  94,  95;  system  of,  143,  144;  and 
trade  unionism,  68,  71, 106, 173, 189;  in  United  States  and  foreign 
countries  compared,  4,  128.  See  also  Demand  and  supply. 

Walsh,  Frank  P.,  41. 

War  Industries  Board,  42. 

Warren,  B.  S.,  92n. 

Washington  State,  Supreme  Court  of,  55. 

Wehle,  Louis  B.,  Labor  Problems  in  the  United  States  During  The  War, 
42n. 

Welfare,  96,  97,  152;  of  labor,  30,  87;  public,  30,  35,  46,  47. 

Western  Union  Telegraph  Company,  44,  45. 

Whitley  Reports,  119n. 


INDEX  213 

Wilson,  President,  39,  41,  43,  44, 

Wisconsin,  apprenticeship  in,  l.".l.  132;  English  language  in,  127; 
hours  of  labor  in,  2'.);  immigration  n^-nt  of,  4,  .r>;  Industrial  Com* 
mission  of,  49,  60,  52,  184;  Insurance  Commission,  84n;  laws  of, 
127n,  132n;  Superintendent  of  Public  Instruction,  135n;  Supreme 
Court  of,  50;  workmen's  compensation  in,  49,  51. 

Wolf,  R.  B.,  168n. 

Workmanship,  instinct  of,  143,  145,  149. 

World  Book  Company,  141n. 

"World,  The,"  187-198. 

World  War,  and  class  struggle,  173,  175;  and  democracy,  127,  128; 
and  England,  117,  117n,  118,  125,  175,  176;  and  Europe,  174,  175; 
Germany  in,  125,  131,  191,  192,  195,  197;  and  health,  104;  and 
Italy,  191,  196;  and  labor,  79,  81,  117;  lessons  of,  125,  127; 
National  War  Labor  Board  in,  41,  42,  70n,  117,  117n,  119,  120, 
120n,  185;  prices  and,  169,  171;  Russia  in,  191,  196;  and  trade 
unionism,  195,  196. 


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